Community bankers, who have long complained about overregulation, are applauding the Comptroller of the Currency's efforts to cut the amount of time it takes to examine wellrun banks.
They say the agency's push to simplify examinations is overdue and could translate into big savings after it goes into effect in October.
The new procedures have "just got to save time," said William H. Brandon Jr., president and chief executive of First National Bank of Phillips County in Arkansas. "Time is money."
"It's going to make a big difference," added Mike Grove, chief executive of First National Bank of White Sulphur Springs, a $20 million-asset bank in Montana. "It certainly is an improvement from the present method."
Hurdles to Clear
About 1,700 national banks could qualify for the simplified examination out of 3,262 institutions examined by the agency. To qualify, banks must meet several tests, which include:
* Being rated one or two under the five-point Camel system.
* Having stable management and ownership.
* Having no significant change in operations since the last examination.
* Operating in a local economy that is generally healthy.
Most of the banks that will qualify are known as noncomplex institutions. In other words, they are plain-vanilla banks that don't offer a wide variety of products. Most of these banks have less than $100 million in assets.
The agency, however, said larger banks, with up to $1 billion in assets, could also qualify if it determines they are noncomplex.
To save time and money, the agency has come up with a set of standardized examination procedures that it says will cut the time bankers spend dealing with paperwork. Bankers will also know in advance of the exam what the examiners are looking for in their review.
The exams will be held on-site and examiners will review a sample of up to 30% of the bank's commercial loan portfolio.
Bankers, however, won't be quizzed on written policies and procedures. Rather, the examiners will focus on the results of the bank.
Mr. Grove of Montana said the OCC's approach to community banks appears to have some of the "common sense" that the agency displayed before the banking crisis of the late 1980s and early 1990s.
"It's true safety and soundness," he said. "They won't be looking at things like the adequacy of your policy manuals. It's as if the reality is sinking in that bankers really do know what they are doing."
Carl J. Schmitt, chief executive of University Bank and Trust Co. in Palo Alto, Calif., converted to a state charter from a national charter last year in part because he felt the Comptroller's office wasn't attuned to small-bank operations. He said, however, that the new examination procedures are a much-needed improvement.
"I think they are on the right track," he said. "Now they just have to train their personnel."
Mr. Brandon said the message from Comptroller Eugene A. Ludwig is already sinking in at the examiner level. He said First National had a safety and soundness examination last week.
"I kind think they [examiners] are shifting their thinking anyway," he said. "I think they are going to like it."
There are those in the industry who want more proof before they say the agency's measures will mean significant cost and time savings.
"I'm not sure how much relief they can really be given," said Steven W. Carson, president of the Carson Medlin Co., a Tampa, Fla.-based investment banking firm that works primarily with community banks. "They are still going to have to comply with regulations. It's a good step, but it is not going to resolve all the issues for the banks."
Bob Smith, a principal in the San Francisco bank consulting firm Smith & Crowley, was optimistic about the move, but he, too, reserved judgment about the program's success.
"It's going to take time to evaluate what exactly the impact will be," Mr. Smith said.
