WASHINGTON Comptroller of the Currency John D. Hawke Jr. told a meeting of community bankers Thursday that his agency will continue to press lenders to improve credit quality.
His remarks came a day after Federal Reserve Board Chairman Alan Greenspan, in a speech to the same group, urged bankers not to overreact to the slowing economy by tightening credit too much. Though Mr. Hawke did not refer to Mr. Greenspans remarks directly, he reiterated the agencys past warnings to strengthen underwriting standards.
Since becoming comptroller, Ive emphasized the importance of fashioning a carefully calibrated response to changes we see taking place in our banks, he told the Independent Community Bankers of America at its annual meeting in Las Vegas. But that does not mean sitting by silently as conditions deteriorate. It means addressing problems as we see them developing while we still may be able to do something about them and doing so consistently and in a measured way.
Mr. Hawke tempered his warnings with praise, however, emphasizing that the industry is better positioned to handle problems than it was before the banking and thrift crisis a decade ago.
In particular, he said banks hold much more capital now. Clearly, bankers have internalized a key lesson of the 1990s: that its possible to meet all the regulatory capital requirements and still not have the level of capital you need to weather a time of great stress, he said.
Mr. Hawke said community banks, unlike larger institutions, have not seen an uptick in troubled loans. Few community banks, for example, hold many of the speculative-grade, highly leveraged, and poorly underwritten assets, especially those backed by so-called enterprise value, which have been hardest hit of late, Mr. Hawke said.
He told the local bankers not to become smug or complacent, however. So what youve got, really, is a window of opportunity time to take prudent, proactive steps to prepare for what may come, and to mitigate the effects of future adverse changes.