The Federal Deposit Insurance Corp. would lose its primary bank supervision functions under a proposal made Thursday by the General Accounting Office.
James L. Bothwell, GAO director of financial institutions and market issues, recommended folding into one agency the Office of Thrift Supervision, the Comptroller's Office, and FDIC's job of examining state banks that aren't members of the Federal Reserve System.
"This new independent agency, together with the Federal Reserve, could be assigned responsibility for comprehensive, consolidated supervision of those banking organizations under their purview," Mr. Bothwell told the House Banking Committee during a hearing on regulatory consolidation.
Under the GAO plan, the FDIC's remaining role would be to oversee the deposit insurance funds; it would retain backup authority to inspect institutions whose condition threatens the funds.
Tuesday, during a banking panel hearing on the same topic, FDIC Chairman Ricki Helfer said her agency's bank examination role and insurance fund oversight must go hand in hand.
"There is no substitute for regulatory responsibility and on-site examinations in order to gain a comprehensive understanding of the condition of insured depository institutions," Ms. Helfer said. "This information is essential to permit the FDIC to predict potential losses to the deposit insurance funds."
Leland M. Stenehjem Jr., president of the Independent Bankers Association of America, echoed Ms. Helfer's argument at Thursday's hearing. He also said having three regulatory agencies lets banks choose a supervisor.
"The functioning of the three federal banking regulatory agencies gives our regulatory system flexibility and builds in creative tensions," Mr. Stenehjem said.
At Tuesday's hearing, Banking Committee Chairman Jim Leach, R-Iowa, said he may bring a bill to the floor this year that would merge the OTS and the Comptroller's Office into a Federal Banking Agency. This measure would leave the other agencies largely intact. Mr. Bothwell of the GAO said he would support the Leach bill.
But Jim Montgomery, chairman of America's Community Bankers, said the thrift group could not support eliminating the OTS as a separate regulator until Congress eliminates the disparity between bank and thrift deposit insurance premiums. Mr. Montgomery is also chairman of Great Western Bank, Chatsworth, Calif.
