WASHINGTON The Federal Deposit Insurance Corp. acted Tuesday on an administration initiative to cut redundant examinations by the bank regulatory agencies.
The three-member FDIC board unanimously approved a proposal by Comptroller of the Currency Eugene A. Ludwig that will require board approval of any FDIC exam of banks regulated by other agencies.
This means that the heads of both the Comptroller's office and the Office Thrift Supervisor who sit on the boar will be able to overrule FDIC staff decisions on when to examine a trouble bank more closely.
Last year, the FDIC examine 1,181 banks thrifts regulated by the OCC, OTS, or Federal Reserve Board. The FDIC was given stronger back authority to investigate troubled institutions in the Federal Deposit Insurance Corp. Improvement Act of 1991.
Spur from Clinton
But many lenders have complained that the duplicative exams are burdensome and poorly coordinated. So as part of his credit crunch relief package announced in March, President Clinton asked bank regulators to streamline exams.
"This is in the spirit of the President's program," Mr. Ludwig said. "Willy-nilly duplication of exams causes a lot of problems."
While the board members agreed to review all cases initially, they said as the plan is revised they may delegate some of this responsibility to senior staff members. And they made clear that the FDIC'S resolution staff retains authority to move into failed institutions without board approval.
Loss of Stature for FDIC
"The agency has clearly had a policy not to have any duplication of exams unless necessary," said FDIC Chairman Andrew C. Hover Jr. "But this will spell out our policy."
One observer pointed to the vote as another sign of the agency's diminished stature.
"The FDIC is in a kind of regulatory free-fall, in the sense that it is rapidly losing power to the other regulators," said industry consultant Bert Ely. "The other regulators are saying, "Don't drop in unless you have a damn good reason to do so." You wonder to what extent the FDIC is even a seat of power now."
Also at Tuesday's meeting, the FDIC officially cut its forecast for recapitalization of the Bank Insurance Fund, saying the fund's reserve ratio would meet the congressionally mandated level by 1998
Insurance Fees Unchanged
That's four years before the agency's earlier estimate. Despite the good news, the FDIC decided to leave bank assessment unchanged for the first half of 1994. By law, the agency cannot cut average assessments below 23 basis points until the BIF'S reserve ratio hits 1.25% of insured deposits. The ratio id now just above 24 basis points.
The banks with $10 billion in assets banks with $10 billion in assets will fail this year, down from $25 billion. Banks with assets of $20 billion will fail in 1994, it predicted, down from an earlier estimate of $45 billion.
But those "loss projections for BIF" remain too high, said Mr. Ely. "I think its almost irresponsible for the FDIC to be making these projections. It just doesn't add up."
