This publication is part of a series of reports to the financial industry providing information about the activities of the FDIC Office of the Ombudsman (OO). Our objective is to summarize matters that you have identified as being of particular concern. We have posted our report on the FDIC Web site at www.fdic.gov/regulations/resources/ombudsman/feedback1.html.

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

Outreach Is Our Calling Card
The OO is in the fourth year of its outreach program to the financial industry. If you have not received a visit or call from one of our regional ombudsman, you will likely be contacted soon. When you are contacted, feel free to say what is on your mind and how you think the FDIC can be a better regulator.

OO outreach extends beyond bank visits and calls. During the first six months of 2005, I attended the ABA Conference for Community Bankers, the ABA National Regulatory & Compliance Conference, the Conference of State Bank Supervisors (CSBS) Annual Conference, the ICBA National Conference, the Mississippi Bankers Association Annual Convention, and EGRPRA banker outreach events. OO staff members also spoke about the FDIC Ombudsman program at the New Jersey Bankers Association Compliance Officer Conference, the Iowa Community Bankers, the Fort Worth Bank Presidents' Peer Group, and the CSBS (Kansas City Region).

Our staff also attends breakfast and luncheon meetings for bankers and banking trade groups hosted by Chairman Powell in FDIC's Washington Headquarters. Please take advantage of this unique opportunity to visit with Chairman Powell and the senior staff to hear about the latest regulatory issues and pose your questions.

Confidentiality and Feedback to FDIC Management
Your insights are a valuable source of information to the FDIC. Willingness to voice your suggestions and concerns to the OO about the FDIC and the banking industry helps make our program a success and the FDIC a better regulator.

We are occasionally asked if what you tell us remains confidential. I assure you that it does. Confidentiality is one of the cornerstones of our program (independence and neutrality are the other two). Confidentiality allows the ombudsman process to work effectively by promoting disclosure, eliciting candid discussions, and addressing fears of retaliation. Confidentiality distinguishes our program from others that simply receive and consider complaints.

Our records contain only the issues you raise. No names are retained in our data base. Our reports to senior management are aggregated to further maintain confidentiality. When you ask for our assistance, we will discuss confidentiality with you to ensure you have a clear understanding of how we will be handling your issue.

An Open Invitation
Visit our office any time you are in Washington, D.C. If you have questions or suggestions, please contact me at (202) 942-3715, or by e-mail at cwebster@fdic.gov.

What You Told Us:
During the first six months of 2005, OO staff spoke with 449 financial industry representatives through visits and telephone calls, industry sponsored conferences, and FDIC events. Approximately 87 percent of those who gave us comments reported overall satisfaction with the FDIC regulatory process. 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. At least 27 bankers complained about the burdensome nature of specific regulations, most notably the Bank Secrecy Act (BSA). One banker noted the duplication of effort among correspondent banks relating to OFAC (Office of Foreign Assets Control) verification requirements. Several bankers spoke of the high cost of compliance, seemingly with no visible results. Two bankers perceived conflicts between BSA and some compliance regulations.

  Passions run high among bankers on the subject of regulatory burden in general, which 30 bankers described as "daunting," "crippling," or "unconscionable," among other adjectives. One banker noted regulatory burden relief has affected about a dozen regulations out of approximately 1,800. "Not much of a relief," he stated. Echoing a common sentiment, one banker complained that the number of disclosures given to consumers is "ridiculous." He went on to say that excessive disclosures reduce the value of consumer information because important issues may be obscured. A number of bankers contend that regulatory burden is necessitating the merger of community banks, which they fear will ultimately result in the demise of smaller institutions.

• Bank Examination Process: Most bankers are satisfied with both the examiners and the examination process. Several bankers acknowledged specific examiners or examination teams for their responsiveness and on-going support. Three bankers praised examiners who helped "turn their banks around."

  A number of bankers praised the MERIT examination process, pre-examination planning, and emphasis on off-site work. Although most bankers are pleased with the streamlined process, one voiced concern about depth in the examinations (minimal loan review was his example) and focus on BSA and IT instead of operations and loans. A state trade association executive observed that his constituents felt that the loan review sample size was too small to adequately assess risk.

  However, not all bankers expressed positive sentiment about the examination process. Mirroring comments about regulation, 19 bankers viewed the examination processes as burdensome, particularly BSA and information technology (IT) examinations.

  Among the negative comments about compliance examinations were those related to the cost of compliance, threat of civil money penalties, and fear that despite a bank's best efforts, bankers are "unknowingly violating some compliance rule or another."

• Survey of Bankers: This year, regional and field office management in the Division of Supervision and Consumer Protection (DSC) asked the OO to conduct an informal banker survey to ensure that the FDIC was receiving accurate and objective feedback of bankers' recent examination experiences. DSC and the OO formulated survey questions relating to examiner knowledge and skills, communication, and recommendations for process improvements. Banker responses indicated satisfaction with the examiners and the examination process. Isolated concerns were consistent with those DSC regional management had previously heard, notwithstanding bankers' acknowledgment of improvements.

Your Requests for Assistance:
During the first six months of 2005, 425 financial industry representatives contacted us for assistance. Over 93% of those requests were for guidance, information, and identification of subject matter experts. The remaining requests were complaints for which the OO provided options, conducted research, or facilitated resolution of the conflict. Examples of issues raised included the following:

• Flood Insurance: Do flood insurance requirements differ for a single family residence versus a condominium, and is real estate taken as excess collateral subject to flood insurance requirements? Which real estate transactions trigger requirements for flood insurance?
• RESPA: Is a balloon residential loan, previously financed by the bank, considered a renewal or refinance for RESPA purposes? What are the possible RESPA implications if the bank allowed a residential development customer to include the bank's link on the developer's Web site?
• Safeguarding Bank Data Provided to Examiners: As a result of increasing identity theft, several bankers have expressed concern about the security of bank data on examiner laptops. All FDIC laptops are password protected. In addition, laptops include encryption software, which is required to be used for proprietary institution data provided in the examination process.
• Special Alerts: The OO has received an increasing number of inquiries asking how to request that the FDIC issue a Special Alert about counterfeit cashier and official checks. The Division of Supervision and Consumer Protection requests that you send an e-mail briefly stating the situation to the alert@fdic.gov mailbox. Use of this mailbox allows FDIC to track and process requests to issue Special Alerts in the order they are received. A FDIC staff member will contact you for any additional information needed. Copies of counterfeit and authentic checks are available through FDICconnect.

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.