The Federal Deposit Insurance Corp. plans to pare by at least 25% the amount of time its examiners spend in banks checking compliance with consumer-related regulations.
Examiners will begin learning the streamlined procedures in July; state nonmember banks will first experience the exams in September.
"We need to be more efficient," acknowledged Paul Sachtleben, director of the FDIC's division of compliance and consumer affairs. "We'll be in bankers' hair less."
Small national banks - those with assets under $250 million - also will get shorter, more focused, and less comprehensive compliance exams. The Comptroller's office plans to start using the new exams in October.
Mr. Sachtleben predicts that under the FDIC's new process, the time examiners spend in banks will be reduced by 50% for Community Reinvestment Act exams, and by 25% in general compliance exams.
These new exams are the most important move made by Mr. Sachtleben's division since it was created last August.
The agency is aiming for greater consistency among its 300 compliance examiners. "We noticed that there were some differences in the way examiners were approaching things," he said.
For example, some examiners will reveal which CRA rating they plan to recommend for the bank while others refuse to give out that information. Under the new system, all FDIC examiners will let the bank know what rating is being recommended, Mr. Sachtleben said.
One of the biggest changes in the new exams is that the FDIC will use its own mapping software to check for compliance with fair-lending laws and the CRA.
For the past year, the FDIC has been testing different geocoding products. In May, the agency chose a system from Tachtician, a Boston software company.
The software, which cost $400,000, has been customized for the agency's use. Examiners using the software can download a bank's loan information from any site before the exam takes place. The software then analyzes the loans for compliance.
"We'll be out of the banker's way and better informed about the institution before we go in," Mr. Sachtleben said.
But Karen Thomas, regulatory counsel at the Independent Bankers Association of America, was skeptical about the software's benefit.
"Whether it turns out to be a help or unfair to the banks will depend on how the examiners use it," she said.
Ms. Thomas added that regardless of the work examiners do, a bank still needs to know its own lending record inside out.
FDIC will get the chance to gauge the effect of its software. The agency plans to survey bankers for reaction to the new exams, Mr. Sachtleben said.
"A year from now we will see how the new procedures are being used," he said.
In fact, the FDIC plans to incorporate responses to a questionnaire sent out in May to 785 state nonmember banks that had just gone through a compliance exam. Nonmember banks are institutions that do not belong to the Federal Reserve system.
The four-page questionnaire included questions about examiners' knowledge of rules and their responsiveness to banker comments and questions. It also asked bankers how well safety and soundness and compliance exams are being coordinated.
The surveys are due this week, and Mr. Sachtleben said the FDIC will use the feedback as it trains examiners next month.
