Is it safe for bank examiners to return to the field?
WASHINGTON — Comments by the head of the U.S. national bank regulator touting the benefits of in-person supervision has ignited a debate over how quickly examiners should plan to be physically inside bank branches and headquarters during the pandemic.
Acting Comptroller of the Currency Brian Brooks said in an American Banker op-ed that bank "examination is a human endeavor ... that works best face to face." Brooks did not say when on-site exams would resume at the Office of the Comptroller of the Currency, which like all agencies has conducted remote oversight amid the health emergency, but he told the ABA Banking Journal that agency offices will reopen June 21.
With coronavirus cases still on the rise in several states, workplace health experts says it is possible to manage the risks of in-person bank examination responsibly. But bankers and some other observers are urging caution about the pace of regulators' re-entry into financial institutions.
"The regulators are going to do what they want to do, but I'd say there's no need to rush this," said Brad Bolton, the CEO of the $153 million-asset Community Spirit Bank in Red Bay, Ala., which is supervised by the Federal Deposit Insurance Corp. "We're still limiting how we work with vendors and receive deliveries. I think regulators should respect that, and let it be our choice. If a bank is comfortable with receiving examiners, sure."
Brooks was the first regulator to signal a resumption of on-site exams. His comments followed an earlier call he made to mayors and governors to weigh the economic risks of "indefinite shutdowns" meant to combat the spread of the coronavirus.
OCC Chief Operating Officer Blake Paulson said Monday the agency still intends to make use of remote monitoring methods.
"The agency has learned the benefits of performing some examination activities remotely and appreciates the flexibility banks and examiners have shown during this pandemic to support the ongoing supervision of national banks and federal savings associations," Paulson said. "We will continue to use this flexibility as long as necessary.”
But even though the agency is focused on the health of its examiners, Paulson said, in-person supervision has benefits that the current process lacks.
“The health and safety of its employees is a primary concern for the Office of the Comptroller of the Currency, and the agency will follow recommendations of the Centers for Disease Control and Prevention and consider local factors, including precautions regarding travel, as we resume on-site examinations," he said. "On-site examination provides insight, clarity and context that cannot be obtained by relying entirely on off-site bank supervision."
Other agencies have stayed relatively silent about on-site supervision returning. On Monday, the Federal Reserve said it would resume its normal schedule of banks exams, but they will be conducted off-site until further notice.
Bolton said bankers should be able to weigh in on when in-person exams continue.
"We feel like we're able to speak candidly with our regulators because the regulators have been so proactive with this crisis and the pandemic, compared to 2008-10, when regulators were more reactive," he said. "In this situation, I don't think any bank would have a problem saying, 'Hey, are you sure we can't do this remotely?' "
Brooks argued that in-person work is an essential component of bank examination, and that subtle nonverbal cues between bankers and supervisors are too easy to miss in a telework setting.
“I'm an evangelist for the use of technology and innovation to improve access and make work and lives easier,” he wrote. “But our work is too important to rely solely on a phone, a webcam and a broadband connection.”
But public health experts emphasize that the coronavirus crisis is far from over.
“The pandemic is still alive and well, or alive and horrible — however you want to describe it,” said Marcy Goldstein-Gelb, co-executive director of the National Council for Occupational Safety and Health. “It has not gone away. Therefore, anyone who is exposed to other people has elevated risk.”
Still, some observers say in-person exams can be conducted safely with social distancing guidelines and other precautions in place.
“If [examiners] follow the current general guidance — six-foot separation and wearing masks, whether that’s surgical or cloth masks, for themselves and others they’ll be talking with — that should be sufficient for this kind work,” said Peter Orris, a professor and chief of occupational and environmental health at University of Illinois Hospital and Health Sciences System in Chicago.
"There’s no such thing in this world as ‘no risk,’ but what you’re trying to do is get the risk to drop below all the risk you face every day, like crossing the street,” he said.
The federal regulatory agencies moved swiftly in March to curtail some examination activities to protect workers and allow banks to focus on their pandemic response. After years of technological advancements that have enabled more off-site monitoring, the pandemic forced the agencies to shift all of their remaining supervisory work to a remote setting.
Some noted that with the technology allowing regulators to do more off-site, the benefits of being on-site may not outweigh the health risks for examiners traveling to banks around the country and bankers accommodating new visitors.
“If I was still working as a field examiner, I wouldn't be too happy to go back,” said Karen Tucker, an independent consultant who worked at the OCC for 31 years, including 14 years as a field examiner from 1981 to 1995.
“There is so much more information available electronically today than when I was a field examiner. Examiners have electronic access to investment details, bank policies and audit reports, for example,” Tucker said. “As always, credit file work is a huge part of the job, and now those are often digitized, too. You can cruise through all the financial statements and do the analysis off-site. So what’s the rush to go back on-site?”
Shawn Davis, president and CEO of CNB Bank & Trust in Carlinville, Ill., said that even though the $1.3 billion-asset bank completed its annual exam this year before the onset of the pandemic, he is confident that if the coronavirus persists, it could fully accommodate a remote exam.
He said recent conversations with his contact at the OCC — the bank's principal supervisor — indicated that the regulator is prepared to handle much of its near-term exam work remotely to avoid imposing any undue health risks on its staffers or banks.
"I think with the technology and tools we have, we could respond to all requests remotely and they could do the exam off-site," Davis said in an interview.
The decision of when and how to resume in-person examination will likely be dictated by the nation’s patchwork response to the pandemic, as communities react and reopen in different ways over the summer.
“I’d advise banks to approach this dialogue with their examiners by talking about what they want to specifically achieve in the exam, and how they want to go about it so that it’s done smartly,” said Cliff Stanford, a partner with Alston & Bird. “It’s going to vary between each bank and their local circumstances, meeting spaces and where the examiner will be physically present in the bank.”
He said regulators should be sensitive to the concerns of individual banks and their local health rules.
"We have to be thoughtful about what’s more important: a person-to-person meeting, or figuring out what we need to do to ensure the free flow of information in the absence of that in-person meeting," Stanford said.
Occupational safety experts say that before any examiner steps back inside a bank office, some kind of plan must be in place that addresses possible points of exposure in the current health landscape.
“You need to know all the points of exposure, all the tasks where examiners might be exposed, worst-case scenarios, and then have a control plan for them,” Goldstein-Gelb said. “Having very clear procedures for minimizing contact between examiners and bank staff is critical.”
That planning process would benefit from input from public health experts, Goldstein-Gelb said, but any plan would be incomplete without input from staff.
“It’s a combination of having someone with expertise who can work with examiners and management, but you must have examiners themselves working on this along with management,” she said. “Workers need to be involved. They know the ins and outs of the job.”
Allowing for social distancing during an exam would be key, Orris said.
“In an office, you’ll need to be six feet apart from each other, and that’s the minimum,” he said. “Six feet is designed as where most of the largest droplets will fall with most of the viral load, but not all. There’s distribution beyond that, but it becomes less significant as you move out. We just don’t know how far that goes yet.”
Then there’s travel. While some examiners are permanently assigned to the nation’s largest banks, many travel widely and frequently from regional hubs, such as Houston, Texas, or Chicago.
As a former examiner, Tucker said that chief among her concerns about in-person exams amid a pandemic would be travel. “Say you're working out of Denver — for most exams, you need to get on an airplane,” she said. “I'd spend weeks flying between Denver and L.A. or Denver and Phoenix. You’re exposed to a lot of people just to get to the bank, and then you start your examination work. “
Stanford said health precautions such as face masks or reduced personnel inside a bank may cancel out some of the benefits of an on-site exam.
"There’s something to be said for being in person, looking people in the eye. It gives people a sense of the organization you might not otherwise have," he said. "At the same time, if a bank hasn’t brought everyone back to work themselves, or the staff is staggered in shifts, you might not have the same observational opportunities there normally would be."
Jim Dobbs contributed to this article.