Gonzales Assails OCC Exams

WASHINGTON - House Banking Committee Chairman Henry B. Gonzalez on Friday released a stinging indictment of national bank examination procedures.

The report is likely to provide ammunition for critics of Robert L. Clarke, the comptroller of the currency, at a Sept. 26 Senate hearing on his nomination to serve a second term.

Rep. Gonzalez's report faults the Comptroller's office for placing heavy emphasis on targeted examinations. Such reviews evaluate specific areas of a bank, such as real estate lending.

A |Mistaken Belief' About Small Banks

The report also critized the agency for "its miscalculation about the impact of smaller banks on the Bank Insurance Fund." Since 1986, Rep. Gonzalez said, small-bank examinations have been deemphasized "on the mistaken belief that these institutions represented little systemic risk to the insurance fund."

Instead, banks with less than $1 billion in assets contributed 75% of the insurance fund's net losses from 1986 through June 1991, he said.

Lee Cross, a spokeswoman for Mr. Clarke, confirmed that the agency has spent less time examining small banks "because there are fewer assets there."

Moreover, the agency conducts full-scope, on-site examinations annually at every bank with over $1 billion, and only supplements those reviews with targeted examinations, added Stephen L. Steinbrink, senior deputy comptroller for bank supervision.

Rep. Gonzalez's report argued that as a result of the regulator's policies, small banks with aggregate assets of $400 billion were not subject to annual on-site examinations. Among large banks, he said, only $200 billion in assets escaped annual on-site reviews.

However, among banks regulated by the Comptroller's office, losses to the fund came almost evenly from large and small banks. By contrast, virtually all the losses from state-chartered banks regulated by the Federal Deposit Insurance Corp. came from small banks.

Mr. Clarke's critics charge that his agency moved too late to moderate bank lending, particularly in troubled New England real estate markets.

Among those with concerns about Mr. Clarke is Senate Banking Committee Chairman Donald W. Riegle, who delayed hearings on the renomination for nearly 10 months.

President Bush announced the reappointment last December, and Sen. Riegle last week scheduled a Sept. 26 hearing. It will come a week after the General Accounting Office briefs the Senate Banking Committee on its study of the Bank of New England failure.

The Gonzalez study also found that national banks, which the Comptroller's office regulates, accounted for $9.1 billion, or 73%, of the net losses suffered by the insurance fund from 1986 through June 1. FDIC-supervised banks added $4.3 billion to net losses, while institutions regulated by the Federal Reserve returned $1 billion more to the fund in insurance premiums than they took out in losses.

Kenneth Guenther, executive vice president of the Independent Bankers Association of America, which represents community banks, acknowledged that small banks historically have caused the lion's share of losses to the insurance fund.

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