A trade group is urging the Federal Reserve Board to make it easier for banks to share examination reports with consultants.
The Fed proposed in February to continue a long-standing policy that bars a bank from distributing exam reports to anyone who is not a lawyer or accountant for it.
The Independent Bankers Association of America said the Fed should expand the list to include consultants. Karen Applebaum, a Fed staff attorney working on the regulation, said the proposed addition is being considered.
The Fed historically has pushed to keep these reports confidential, believing this encourages bankers to be candid with examiners. Currently, a bank only may show its exam report to an outsider if the Fed's general counsel approves, but sources said these instances are few and far between.
The trade group filed one of just two comment letters on the Fed plan to revise rules limiting the supervisory information banks are permitted to release. The other letter, from Banc One, raised a technical question.
The independent bankers' group said small banks often rely on consultants to solve consumer compliance problems. Yet the consultants are hamstrung by regulations that prevent them from seeing how the examiner views the client bank.
"We have a lot of small institutions without much experience," said Rob Rowe, counsel to the trade group. "So it's helpful for them to rely on a consultant."
Mr. Rowe noted that the Office of the Comptroller of the Currency already allows banks to provide exam reports to consultants. "One agency already does it, and it would be less confusing if the others did it," he said.
The trade group did not push for carte blanche authority. It recommended requiring a bank's board of directors to authorize release of exam reports to a consultant.
Lucy Griffin, president of Compliance Resources Inc., Falls Church, Va., supported the trade group's recommendation. She said officials at most problem banks cannot adequately explain to consultants the problems examiners outline in their reports.
The restriction also can be expensive. Ms. Griffin said she often has to reconstruct an examiner's report, a process banks must pay for.
"Without seeing the report, I have to rely on the bank's description, and I'm kind of flying blind," she said.
Gof Thomson, president of the Bank of New Glarus, Wis., said directors often want to show exam reports to consultants who are hired to develop strategy or assess high-level managers.
"I think that access to the examination improves the quality of a report back to the board from an outside consultant," said Mr. Thomson. "I just don't see the risk of letting them see it."
Mr. Smith writes for the Medill News Service.