WASHINGTON — We've heard you. We're working on it.
That was the message Martin Gruenberg, acting chairman of the Federal Deposit Insurance Corp., sent Friday to community bankers who have complained about their tense relationship with examiners in a postcrisis world.
Better communications will go a long way toward mending fences, Gruenberg said at American Banker's Regulatory Symposium in Washington. Agency officials next month in San Francisco will hold their sixth roundtable with community bankers on a range of issues, and they are taking steps to help bankers better prepare for exams.
"Community bankers said that communication between examiners and the banks is crucial," Gruenberg said. "Bankers expect that the materials they provide to facilitate this advance planning will enable examiners to be as efficient as possible once they are on site."
Gruenberg touched on various topics during his speech, including what should go into Congress' decision about the fate of the Transaction Account Guarantee program and the FDIC's review - along with the Federal Reserve Board - of the first batch of resolution plans submitted by nine of the largest financial companies.
Speaking to reporters afterward, Gruenberg also said bank regulators are "working" toward finalizing the regulation implementing the Volcker Rule — the provision in the Dodd-Frank Act named for former Fed Chairman Paul Volcker that bans banks' proprietary trading — by yearend. If they are successful, it would advance one of the most contentious provisions of the reform law.
"That's the intention - to try to get it done," Gruenberg said when asked whether he thought the agencies could complete the rule before Jan. 1. "We will see."
But his formal remarks concentrated on the agency's community bank efforts.
The roundtables not only shed light on the need for pre-examination communications, but also on banks having access to post-exam reports that accurately reflect key elements of the exam, Gruenberg said.
A common refrain, he said, is "the examiner's communication with management at the beginning of the exam should clearly lay out the focus and goals."
"In addition, we heard about how important it is that the exam is followed up by a timely examination report that focuses on the same issues identified during the on-site discussions with bank management," he added.
The FDIC over the past year has also been working on a study charting the evolution of community banking, and plans to review whether changes in regulatory policy are warranted to help them.
"The study is … going to be a groundbreaking piece of work," Gruenberg told reporters afterward. "There really hasn't been a review like that done. I really hope it's going to place the role of community banks in the financial system in context, and it's going to help us in a lot of ways, potentially on rulemakings and guidance, but also in our examinations and supervision."
Regulators are also "very conscious" of concerns about how the Basel III rulemaking will affect community banks, he said. They have held informational sessions around the country with bankers about the rules, and the FDIC in each regional office now has an expert equipped to answer banker questions about them.
"Our intention here is to make this proposed rulemaking process as clear and as transparent as we can," Gruenberg said.
[Also at the symposium Friday, Thomas Hoenig, an FDIC director, recommended that the Basel proposal be scrapped for something simpler, and experts urged that requirements be eased for community banks.]
The regional roundtables not only focused on the regulatory environment but also on challenges presented by rapid technological change, Gruenberg said.
"It is fair to say that participants in the roundtables continue to believe in the community-bank model. The model depends on knowledge and understanding of their borrowers, particularly small businesses, and reliance on core deposits for funding," he said. "Many of the community banks that failed during this crisis diverged from this model. But the vast majority of community banks stuck to the basics and have emerged from the crisis in good shape and in a position to support renewed economic growth in their communities."
On "living wills," the plans large companies must submit on how their firms would be unwound in a bankruptcy, Gruenberg said the FDIC and the Fed "are now in the process of reviewing the plans for information completeness and compliance with the requirements of the rulemaking."
"This will be a thorough and in-depth process that takes into account each financial company's unique characteristics," he said. "And it will involve an ongoing interactive dialogue between the companies and the agencies."