Office of the Ombudsman
Concerns about Examinations and Regulation
I am pleased to present the latest in our series of online reports to the financial services industry about issues and concerns raised to the FDIC Office of the Ombudsman. This report covers the period January 1, 2010, through June 30, 2010.
During the first half of the year, 442 industry representatives contacted the Ombudsman requesting assistance. In addition, Ombudsman staff spoke about banking matters with 93 financial industry representatives through outreach visits, telephone calls and industry-sponsored conferences. The major area of concern for industry representatives continued to be the struggling economy, but also evident was concern about regulation changes and examinations they perceived as aggressive, particularly those relating to loan quality.
We welcome suggestions and concerns about the FDIC in its supervisory role. The Ombudsman summarizes these comments for FDIC senior management review - without attribution - to eliminate the possibility of reprisal. In addition to regional ombudsmen, ombudsman specialists in Washington, D.C., provide assistance, regardless of your location.
During the first half of 2010 the majority of bankers contacting the Ombudsman sought guidance on changes in regulations. For example, a few de novo institutions expressed the opinion that the new guidance, "Enhanced Supervisory Procedures for Newly Insured FDIC-Supervised Depository Institutions," was not clear. Even so, relatively few bankers complained to the FDIC's Office of the Ombudsman about the approximately 3,839 examinations conducted in the first half of 2010.
Regarding complaints, some bankers expressed frustration about examinations they perceived to be overly aggressive, while others dislike the manner in which examiners communicate negative information. Some bankers suggested that examiner's tough loan reviews are discouraging lending. The Office of the Ombudsman acknowledges the sincerity of these complaints without opining on their individual basis in fact.
Conveying and receiving negative information is often a perception issue. FDIC supervisors recognize this challenge, and periodically relay bankers' concerns to examiners. FDIC Chairman Bair is aware of industry concerns and wants to assure bankers that the FDIC is trying to achieve a balanced approach to supervision during these challenging times. Bankers who believe their examination is overly harsh may contact the FDIC's Office of the Ombudsman to allow the FDIC the opportunity to address the issue.
The increased number of problem banks, 829 as of June 30, 2010, has led to an increase in the average time it takes the FDIC to issue reports and process applications. Institutions whose ratings are being lowered may experience an increase in processing time. The FDIC has recently increased its workforce to ensure processing times are as brief as possible.
As significant changes in regulation occur with passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, banker reaction to these issues will emerge in future reports to industry.