Examiners should stay focused on ‘big picture’: FDIC’s McWilliams

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WASHINGTON — A clean home will always have dirt.

Federal Deposit Insurance Corp. Chairman Jelena McWilliams used that analogy in a speech this week to discuss her philosophy on bank supervision. She said she wants her examiners to be proactive with banks that show visible problems, but not “focus more on seeking out dirt than on whether the home is clean.”

“Sometimes we, as regulators, can become so focused on finding shortcomings that we lose sight of the big picture,” McWilliams said Thursday night in a speech for a Banking Institute event in North Carolina.

Her comments echo other steps the agency has taken under her watch to achieve regulatory balance and reduce redundancy. In September, the FDIC proposed retiring 374 out of 664 “financial institution letters,” related to risk management supervision, that had become outdated or duplicative.

On Thursday, she indicated a wider scope, saying the agency had retired 493 FILs, which was “more than half of the 837 FILs that were outstanding."

“These communications are intended to help bankers understand our expectations. We do not want bankers devoting their time just trying to understand what is relevant and what is not,” McWilliams said. “I'm hopeful that the elimination of these redundant and outdated FILs will make our communications more helpful, both those that exist now, and those that we issue in the future.

McWilliams used the example of cleaning her house to explain the tone she wants examiners to set.

“This is not to say that our examiners are doing a poor job. To the contrary, they are doing exactly what they are trained to do and, in the vast majority of cases, doing it exceptionally well,” she said. “But I compare our examination process to cleaning my house. I live with my daughter, two elderly parents, and two dogs. I am quite skilled at getting rid of dirt and, with two dogs, I have to clean frequently. I promise you that I have a clean house. However, no matter how much cleaning I do, I can always find dog hair. And as I spot little balls of white hair out of the corner of my eye, I have to remind myself the house is clean ... because I just cleaned it.”

But she added that under this approach examiners should respond quickly to trouble signs at institutions they supervise.

“If we walk in and find that the home is dirty, we will take action,” McWilliams said. “And you can rest assured that if you try to just sweep the dirt under the rug, we will find it."

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