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The FDIC is trying to help bankers prep for exams and more clearly understand the results as part of a broader effort at improving relations, Martin Gruenberg, the agency's acting Chairman, said.
September 14 -
In interviews with two dozen bankers, regulators and outside experts, most point to a significant improvement between how bankers and examiners interact.
June 8 -
Small-bank executives sound call for stronger firewalls between financial activities, but many say a straight return to the Depression-era law could have unintended consequences, including to their own business.
October 3
WASHINGTON – Bankers who want federal regulators to stop asking for pre-exam data irrelevant to their institutions received some positive news Thursday as the Federal Deposit Insurance Corp. announced a new tool for examiners.
Dubbed "ePrep", the FDIC said the new system will customize requests to fit banks' specific circumstances rather than just seek mounds of data.
"The tool is built with a community bank focus in mind. It utilizes filters to ensure that the request is tailored to the institution," Kristie Elmquist, the FDIC's Dallas regional director, said at a meeting of the FDIC's community bank advisory committee.
The meeting was meant to update the committee on the progress of three community bank-focused projects the FDIC plans to more fully report on by the end of the year. In addition to steps the agency is developing – including "ePREP" – to improve the supervisory process for community banks, officials also discussed findings from six roundtables the FDIC held around the country to hear common community bank concerns, as well as a research study the agency is conducting on the evolution of the community bank sector over the last 28 years.
The new pre-exam tool – the complete title is Electronic Pre-Exam Package – has so far been piloted in examinations for 30 banks under the FDIC's watch, and is slated for general use either before the end of this year or early 2013. It allows examiners seeking pre-exam information to specify the type of exam, as well as the types of bylaws, executive committee minutes, loan and liquidity information, and other characteristics germane to the bank being examined, in order to craft information requests that truly reflect the bank's structure.
"This approach is to eliminate requests for items that are not needed by the examiner or even applicable to your institution," Elmquist said.
FDIC officials summarized common themes the agency has heard in the six regional roundtables, including concerns about lower earnings potential for community banks, the perception that larger or less regulated institutions have unfair advantages and difficulty in attracting investors. Participants have also focused on the dearth of high-quality loans for community banks – with refinancings being among the few growth areas – and the intense competition for them.
In addition to enhancements in the pre-exam process, bankers also said there is a need for an improved electronic system for sharing documents, exam teams are most effective when they are experienced and knowledgeable about a bank's local market, and institutions yearn more up-to-date information about new regulations coming around the bend.
"Bankers want to know what's in the pipeline, what's coming out, how it will affect me," said John Weier, a special advisor to acting FDIC Chairman Martin Gruenberg.
Gruenberg said "the input from these roundtables have been taken directly into the research work we're doing in addition" to the new supervisory steps.
Bankers on the advisory committee applauded the FDIC, saying the findings from the meetings accurately reflect general concerns felt throughout the community bank sector.
"You nailed it," said Charles G. Brown 3rd, the chairman and chief executive officer of Insignia Bank in Sarasota, Fla.
Matthew Williams, chairman and president of Gothenburg State Bank & Trust Co. in Nebraska, echoed praise for the agency, but said action will speak louder than words.
"My challenge for everyone in this room is to take the findings … and be active about a solution rather than wait for the right political situation," said Williams, who is chairman of the American Bankers Association.
Two senior officials in the FDIC's research section said the upcoming study will attempt a new definition for community banks that does not rely solely on size, and will chart the performance of community banks compared to larger institutions since 1984.
Arthur Murton, the FDIC's head of insurance and research, said he expects the study will conclude that banks do not have to be big to survive.
"We're hearing there are consultants out there saying you have to be at least a billion dollars to make it. I think … we're going to show that there are banks below one billion that have been around for the entire period and done well," Murton said. "That suggests one conclusion. But it will also do some more sophisticated econometric analysis … that will suggest … depending on your specialty type there is a range of size you can be.
"There are about 5,000 community banks that were there in '84 and are still there. ... A theme that we think has emerged from the work we've done is that community banks that tend to stick to their knitting do okay, and we expect that there will continue to be community banks well into the future."
Other initiatives the FDIC has launched to respond to complaints about supervision include a Web-based regulatory calendar to keep bankers informed about important dates, including comment deadlines on rulemakings and when regulations become effective. Another step is a section on the FDIC's website called the "Director's Resource Center", which is meant to address concerns smaller banks have about educating their board members about important regulatory topics. The center includes a link to a "Pocket Guide for Directors" as well as information about regional seminars the FDIC holds specifically for directors.
