Minnesota pair push off-site bank exams.

Community bankers who are tired of examiner squads in vading their office and gobbling up space and staff might consider the ideas of Ronald L. Ingersoll and James A. Dosen.

The Minnesota pair have struck an informal partnership to investigate how to use technology to let examiners review some of banks' data via computer outside the bank.

"We both work ... with community banks, and we've seen the frustrations and the costs" related to exams, said Mr. Dosen, partner and financial institutions services department director at Baune, Dosen & Co., a Minnetonka, Minn., accounting firm. Mr. Ingersoll is president of Modern Computer Systems, Burnsville, Minn., which sells systems software to community banks.

While the duo envision a nationwide system that could ultimately slash 75% off the time examiners spend in banks, the first application of their ideas comes in a test with two Minnesota banks.

The concept of computerized reporting is relatively untried in the banking and regulatory world, though not in business in general. Most public companies are expected to file electronically their quarterly and annual reports with the Securities and Exchange Commission before the year 2000.

Banks to Test Procedures

Starting later this summer, a rural $40 million-asset bank and an urban $300 million-asset bank, along with the Minnesota Department of Commerce, will test off-site exam procedures on a trial basis.

"This isn't something that's designed to water the exam down, just to do it a little more efficiently," stressed James Miller, Minnesota's deputy commissioner of commerce.

Mr. Miller said that about 25% of exam preparation and analysis can likely be accomplished off-site.

Mr. Dosen said that the amount of on-site work that can be reduced depends on how much information a bank can computerize. He hopes on-site work can eventually be reduced by 75% or more. He said the changes would cut audit expenses in half or by a third.

On-Site Work to Remain

Although theoretically everything could be done off-site, "I think the need to do some on-site work is very necessary," Mr. Dosen said. "There's still going to have to be discussion and cleanup."

Neither do regulators want to plug directly into banks' data bases, Mr. Miller said.

Mark Hewitt, president and chief executive of $34 million-asset Northwoods Bank of Minnesota, Park Rapids, agreed. "I would probably not be in favor of giving the regulators carte blanche access," he said.

State and the Federal Deposit Insurance Corp. exams usually bring five examiners to Northwoods for about three weeks, he said. The bank puts them "wherever we can find space."

His 19 employees would love to see some of the process moved off-site, he said. "You're trying to take care of your customers and you constantly have someone coming in and saying, 'Where's this document?'"

Mr. Dosen said the idea took off during planning for Future-Bank '94, a technology expo held last month in Minneapolis for community banks.

To assess banker support, he and Mr. Ingersoll set up a booth there to survey community banks' views on exams. They intend to share the results with Minnesota's Commerce Department later this week.

The next step is to try to organize a forum of regulatory agencies to formulate the computerized reporting standards, with input from vendors and bankers.

Both Mr. Dosen and Mr. Ingersoll could benefit from changes to the system. "Obviously, we're pushing this because it's going to make it much more efficient for us," Mr. Dosen said. "There's going to be a need for software and so on to develop."

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