Each depositor insured to at least $250,000 per insured bank

This publication is the second in a series of periodic reports to financial industry representatives designed to provide current information about the activities of the FDIC Office of the Ombudsman (OO).

To receive e-mail notification of new issues posted to the FDIC Web site, follow the instructions posted at www.fdic.gov/about/subscriptions/index.html.

Outreach
The OO has completed the third year of its outreach program to the financial industry. Over the last three years, OO staff members have spoken with many of you personally to explain our role as an industry liaison and resource. In fact, I had the privilege to speak with a number of you at the October 2004 America's Community Bankers Conference in Washington, D.C. and the November 2004 American Bankers Association Agriculture Conference in Minneapolis. Your willingness to share your time, as well as your suggestions and concerns about the FDIC as a regulator, and about the banking industry, in general, has helped to make our program a success.

Feedback to FDIC Management
Your insights are a valuable source of information to the FDIC. The information we receive from you is aggregated to preserve confidentiality and is reported quarterly to senior management. This information is also used for specialized reports, such as regional reports or systemic issue reports.

Outreach Follow-up
To ensure that we continue to meet your needs, the OO conducts a short, quarterly on-line survey of those of you who were phoned or visited by us during the previous quarter. Your participation is voluntary and confidential, but we would like to hear from you how we can improve our program. To facilitate this process, our staff may request your e-mail address. Your e-mail address is not shared outside of our office and is used judiciously.

If you have any questions or suggestions about this report, please contact me at (202) 942-3715, or by e-mail at cwebster@fdic.gov.

What You Told Us:

Outreach Activity
During the last six months of 2004, OO staff spoke with 739 financial industry representatives through personal visits and telephone calls, during industry sponsored conferences, and at FDIC training events. Approximately 93% of those who commented during these contacts reported overall satisfaction with the FDIC regulatory process. Many comments were received on the following topics:

• Burdensome Regulations: Concern about regulatory burden imposed on financial institutions continued to be the most frequently raised issue. “Burdensome” characterized 45% of the dissatisfaction expressed. Forty-seven bankers complained about the burdensome nature of specific regulations, including the Bank Secrecy Act (BSA), Sarbanes-Oxley, and the Home Mortgage Disclosure Act (Regulation C). In addition, 51 bankers spoke of the overall burden imposed by regulations in general; the quantity and complexity of regulations and the time and resources involved in complying with them make it increasingly difficult for banks to keep up. Echoing a common sentiment, one banker noted that his staff spent more time on compliance than on lending and investments. (NOTE: FDIC, as a member of the Interagency EGRPRA Task Force, has been assessing various regulations viewed as burdensome by the financial industry. The Task Force is currently seeking burden reduction recommendations on money laundering, safety and soundness, and securities rules. More information about this project, which is headed by FDIC Vice Chairman John Reich, can be found at www.egrpra.gov.)
• Check Clearing for the 21st Century Act (Check 21): While conducting outreach, the OO assisted the FDIC Check 21 Working Group by surveying bankers about their preparations for Check 21. Most bankers believed that electronic processing is the way of the future, and that bank operational savings will accrue as a result. Some small banks believed that Check 21 will save money for larger banks, but may have less positive impact on them. Some bankers pointed to public concern regarding potential fraud, perhaps because of unfamiliarity with imaging and substitute checks. Others expressed concern that overdraft fees might rise, and that Check 21 may have an unanticipated impact on industries that have historically relied on “check float.”

Charter Conversions
In addition to outreach activity, the OO also contacts on a quarterly basis banks that have recently either come under or left FDIC supervision. During 2004, the OO spoke with 69 banks. Of the 34 banks becoming FDIC supervised institutions, the most common reason for doing so was to align holding company banks under one regulator. Other reasons cited were: regulation by FDIC was “less expensive” and more “banker-friendly”; other regulators were perceived as stricter regarding BSA; market share increases could be pursued more readily; and the FDIC has helpful “local market knowledge.” Of the 35 deciding to leave FDIC supervision, once again the common rationale was to align holding company banks under one regulator. Other reasons for changes included: thrift charters allow mutual holding company flexibilities for expansion/branching; the belief that federal charters involve less regulation; and other regulators are “service-oriented” and “communicate more effectively.”

OO Customer Satisfaction Survey
In June 2004, the OO implemented a Customer Service Satisfaction Survey. The survey is designed to monitor the effectiveness of OO’s outreach program and gauge the use of OO services. Of the 995 industry representatives invited to participate in the survey, 448 (45%) responded and provided valuable feedback regarding OO outreach efforts.

• Ombudsmen Dialogue: Respondents ranked highly OO representatives’ ability to explain various aspects and functions of both the OO and the FDIC.
• Use of OO Services: Many respondents indicated that, as a result of our outreach efforts, they know how and when to contact the OO. Many also told us that they plan to use our problem resolution services before submitting a formal appeal or complaint to the FDIC and will contact us to obtain regulatory information. An overwhelming number will encourage their peers to seek the services of the OO.
• Recommendations to the OO: Many asked that the OO periodically contact them through e-mail or via FDIC website. As a result of these requests, the OO initiated this on-line report.

The OO will continue to administer the Customer Service Satisfaction Survey on a quarterly basis.

Your Requests for Assistance:

During the last six months of 2004, 318 financial industry representatives contacted us for assistance on a variety of matters, including those related to examination and regulatory processes. Over 88% of those requests were for guidance, information, and identification of subject matter experts. The remaining requests were complaints to which the OO provided options, conducted research, or facilitated resolution of the conflict. Frequently raised issues included the following:

• Bank Applications: The OO received a number of inquiries about the bank application process, including whether formal notification or applications are required to conduct certain business activities, open a loan processing center in another state, add a new board director, or remove a CEO. Several bankers praised the charter and merger application processes, while others complained that the charter and branch application processes take too long. Another banker, concerned that big banks were saturating his bank’s market, suggested that FDIC consider a “needs test” before approving branch applications.
• Bank Secrecy Act: A banker complained about a conflict between BSA and Regulation CC (Availability of Funds and Collection of Checks). He believed that the standard clearing periods do not provide sufficient time to investigate a possible suspicious account or transaction under BSA, thus justifying an extended hold. Several bankers requested assistance on Suspicious Activity Report and Cash Transaction Report filing requirements and Money Service Businesses.
• Regulation B and Equal Credit Opportunity Act (ECOA): Several bankers in community property states disagreed with FDIC’s interpretation of state laws governing spousal signatures. Other bankers requested assistance on ECOA issues, including testing of a new loan product and the propriety of requesting information about an applicant’s life insurance.

To find out more about the services the OO provides, or to contact us with questions or for assistance, click on www.fdic.gov/about/contact/ask/contactinformation.html#Ombudsman.