In the old days, bank safety and soundness exams were conducted like police raids.
"Every bank was examined on a surprise basis," Nicholas Ketcha Jr., director of supervision for the Federal Deposit Insurance Corp., says of the 1960s. "We would come in and count all the cash in the place."
These days, bank exams are more civilized. The state chartered banks regulated by the FDIC get at least two weeks' notice. And examiners at all the agencies are trying to make their visits as short and sweet as possible.
Mr. Ketcha said the FDIC's goal is for examiners to reduce by 25% the time spent on site at each bank. The FDIC also wants to trim the total time examiners spend evaluating a bank by 10%.
Other banking agencies are implementing similar goals. The Office of Thrift Supervision has trimmed its exam time by 15% to 20%. FDIC examiners spend from a week at very small institutions to two months at very large banks, particularly those involved in derivatives, Mr. Ketcha said.
A year ago, the FDIC started studying how examiners were using computers in each of the agency's eight regions. The plan, Mr. Ketcha said, was to learn from the field offices that were most effectively using technology in the exam process.
Last fall, that effort produced Alert - the automated loan examination report tool. The computer program permits examiners to manipulate data from banks in dozens of ways that can save time.
The program also provides examiners with a standardized form for loans, with blanks that can be filled in. Examiners used to spend hours taking notes at the bank.
Mr. Ketcha said that the FDIC is showing Alert to state banking departments and other agencies, including the OTS and the Comptroller's Office. The Federal Reserve unveiled its own automated loan-analysis program, Examiner Workstation, in February.
All FDIC regions began using Alert this summer. Although dollar savings have not been calculated, Mr. Ketcha said the software has saved examiners hundreds of hours of work and has shortened their out-of-town stays.
Jim Fraser, chief executive officer of Brighton Bank in Salt Lake City, said the new approach meant FDIC examiners spent one week less at his $95 million-asset bank this summer.
The agency called ahead and got a computer diskette with all the information on loans by size, name, description, and terms, he said. Because they got so much information off-site, examiners spent only two and a half weeks at the bank, and they asked significantly fewer questions, he said.
The exam was much less disruptive to his business, Mr. Fraser said. "It was the best FDIC audit, because it was the shortest."
Alert 2.0 - faster, more efficient loan-analysis software - is scheduled to be ready by the end of the year. It will feed data into a larger system under development by the FDIC: Genesys, or General Examination System.
This software will address every area of a safety and soundness exam, including not only loans but also changes in deposits and assets, management, earnings, and capital. The Comptroller's Office is developing software, which it calls Examiner View, to give all supervisors on-line access to prior exam reports.
