Comptroller's Man in London Keeps an Eye on the Markets

LONDON - The only overseas office of a U.S. bank regulatory agency is not a glamorous place.

Hidden in a warren of windowless rooms in the attic of the U.S. Embassy, it can't even be reached by elevator.

But John Mastromarino, London examiner-in-charge for the Office of the Comptroller of the Currency, isn't complaining.

He and the three examiners who work under him spend most of their time in banks, not in the office. And though the operation he runs isn't exactly high-profile, Mr. Mastromarino says he thinks his work is about as important and exciting as bank regulation gets.

The Comptroller's office opened its London branch in 1972, when U.S. banks were rapidly expanding abroad. In the mid-1970s, as many as 30 U.S. banks had London offices.

That number is way down, and Mr. Mastromarino's office now oversees just 12 national banks - with Citibank, Chase Manhattan, Bank of America, and NationsBank the most important. The big London offices of state-chartered Bankers Trust, Chemical Bank, and J.P. Morgan are overseen by Federal Reserve Bank of New York examiners who fly over from New York.

While the banks regulated by Mr. Mastromarino's office today are fewer in number, they "are into far more complex products" than they were 20 years ago, Mr. Mastromarino says. And, he notes, London's reemergence as a major world financial center has made it crucial for U.S. bank regulators to keep track of developments.

"That's really the purpose of why we have this office here," Mr. Mastromarino says. "So we understand the markets, so we understand new products."

Bank exams take up about 60% of his and his staff's time, he says. The rest is spent preparing papers on emerging financial products, devising examination procedures that take into account new products and developments, and keeping up with the financial markets.

"One of the main things we do here is market intelligence," Mr. Mastromarino says. "It's just very difficult to quantify."

Much of this "intelligence" is a result of the examiners' being on-site - they are more likely than regulators in Washington to hear of impending scandals, industry developments, and gossip making the rounds in London and on the European continent.

Another advantage of the London office is simply that morning in London comes five hours before it does in Washington.

When Mr. Mastromarino gets to the office, he turns on his computer, logs on to CompuServe, and finds out what's up in the Tokyo markets. If something big appears to be brewing, he keeps close track of developments on the Tokyo and London stock exchanges - and fills in his Washington superiors as soon as they get to work.

During Mr. Mastromarino's first tour of duty in London, the stock markets' wild ride meant he couldn't wait until his bosses got to work. "In 1987 we got them out of bed," he recalls. "They had to get us out of bed, too, I might add. It was critical we were here."

The main concern in 1987 was with the brokerage houses. "With the huge (stock market) move, there was a liquidity problem for them," Mr. Mastromarino says. "And many of them had lines of credit with U.S. banks."

Mr. Mastromarino, an 18-year veteran of the Comptroller's office, left London for Washington in 1988 and returned in 1993 as examiner-in-charge.

This time around, with no worldwide financial crises to deal with - so far - Mr. Mastromarino has been able to focus his energies on watching for European market trends likely to hit New York down the road.

"The Americans aren't the only innovators," he says. "The French are very good in options."

After watching French options traders and London hedge experts in action for a few years, Mr. Mastromarino adds, the London office staffers are able to return to Washington as "our capital markets experts."

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