"Bank exams too often are failing their purpose to keep banking strong and banks focused on serving customers. Too many banks are worse off as a result of their exams." - ABA Banking Journal
So, what does the ABA do to address the concern? It hires two experienced, prominent financial experts - Dr. Robert Litan (Kauffman Foundation/Brookings Institution) and Jerry Hawke (Washington lawyer/former head of the OCC) to conduct a study of the issue.
The study - "Value-Added Bank Supervision: A Framework for Safely Fostering Economic Growth" - makes eight recommendations to improve the bank exam process:
- Customized Supervision - to fit bank's business model, location, charter, size.
- Focus on the "big picture"- risk-based, focused on things which really matter, rather than "gotcha" exercises.
- Clarity on Capital requirements - reality-based exams - effective, knowledgeable evaluations.
- Stress Testing - as an option to limit account/loan exam reviews.
- Risk Management of loan losses - more weight to GAAP practices and Allowance/reserve adequacy.
- Experienced Examiners - senior led, balanced depth; too much obvious inexperience.
- Cooperation with State Examiners - respect and recognize importance of State regulators and areas of expertise.
- Self-Review - assess whether what is preached centrally is in fact practiced, in a timely, effective, and professional manner.
Sound fair? Reasonable....?
While the ABA works through these important issues with it's members "to improve the exam process, so banks can get back to the business of promoting economic growth"....
|Traffic Circle "Leadership"?|
- What have credit unions done about these issues?
- Why not?
- Who should be leading this effort?
- Why haven't they?
- What are we waiting for?
.... what if we all decided to just work together openly on these issues?
[A "reality-based exam" would be nice for a change!]