WASHINGTON – Although the Federal Deposit Insurance Corp.'s yearlong study of challenges and opportunities for community banks is expected to yield a final report next month, the agency will release an update on some of its findings this week.
FDIC officials will brief an advisory committee on Thursday about each of the three areas of the initiative, which included regional meetings between bankers and FDIC brass; a research study exploring the history and makeup of small institutions; and agency efforts to make the supervisory process more efficient for community banks.
The briefings are anticipated to be just summaries of the FDIC's progress, with more detail expected in the final report.
"This is a preview for the advisory committee to get feedback from them on some of the issues we're looking at. We're hoping to do the release next month," Martin Gruenberg, the agency's acting chairman, said in an interview Tuesday.
In October, Gruenberg completed the last of his six regional roundtables with community bankers to clear the air about issues facing the sector.
While he cited some geographic variation in concerns expressed – namely that rural banks tend to focus on different concerns than those raised by banks in metropolitan areas – Gruenberg reiterated some common themes heard in the meetings. Those include that banks expect better pre-examination work from the agency – increasing the chance for an efficient exam – and want post-exam reports to be timely and include information that is consistent with what the institution heard on-site.
"From our standpoint those are all very reasonable points that the FDIC is going to focus on," Gruenberg said. "We really do expect to undertake a number of initiatives based on the feedback we've gotten from the roundtables."
Community bankers have also cited operational challenges in their sector, Gruenberg said, including succession planning for bank management and attracting qualified personnel. Yet institutions are confident that their business model, which relies on relationship banking, will breed success, he said.
"There is also a general sense that the institutions now as a general matter have strong capital and strong liquidity and are really well-positioned to meet increased loan demand." Gruenberg said.
The roundtables – which took place in Dallas; Atlanta; Chicago; Kansas City, Mo.; New York City; and San Francisco – typically included 12 to 15 bankers sitting around a table with Gruenberg; Sandra Thompson, who heads the agency's division of risk management supervision; and Mark Pearce, who oversees consumer compliance exams. The meetings were off the record.
"In each of the roundtables, the bankers had strong views, but they really communicated them in a constructive way," Gruenberg said.
He said Thursday's meeting is intended to give the advisory committee "a sense of the research work we've done, some of the feedback from the roundtables and some of the things we're thinking of in terms of the examination and rulemaking process."
"We'll use" input from the advisory committee following the briefing "in producing our final work product," he said.
Among the federal regulators, the FDIC has been the most aggressive in addressing community bank concerns about the stringency of post-crisis exams and fears about the sector's future amid continuing consolidation and rapid technological changes.
Following accusations by executives that exams became overly harsh in the aftermath of the mortgage crisis, industry representatives continue to identify improvements in the relationship between banker and supervisor.
"The general feeling among most bankers is that the exam experience today is more positive than in previous exams. Reports are being received in a more timely fashion and there are mostly no surprises in the report. That has pretty much gone away," said Joe Brannen, the president of the Georgia Bankers Association.
"We continue to hear bankers report more positive stories, specifically about component upgrades. ... You would expect that after we have been in this cycle for four years and are now coming out of it. But the bankers we're hearing from are confirming that."
Gruenberg said the report to be released next month is only the start of the agency's focus on the sector.
"This is going to be an ongoing priority for the FDIC," he said. "I really view the work we've done this year as a beginning to get a better understanding of the role of community banking within the U.S. financial system. I very much expect us to continue this next year."