One year after the Office of the Comptroller of the Currency reorganized its oversight of large national banks, the agency's examiners are facing their biggest test.
The recent wave of huge mergers has put the agency's three deputy comptrollers in charge of large-bank supervision under intense pressure to make sure the deals are pulled off smoothly, with no major mishaps that could shake confidence in the banking system.
"There are a number of things that can blow up," said Douglas W. Roeder, a deputy comptroller assigned in May 1997 to coordinate supervision of the 33 largest national banks.
"If companies lose a grip on their combined operations," he said, "they could see thousands of customers flee and suffer permanent damage in terms of lost business."
Rounding out the trio are Delora Ng Jee and Timothy W. Long. Each has spent a decade or more in the agency's exam force, serving as examiner-in- charge at such institutions as Chase Manhattan Bank, NationsBank, and Fleet National Bank.
The OCC shifted supervision of the top institutions to Washington from six district offices to ensure more consistent oversight.
"The structure the agency has in place was designed with the mergers taking place today in mind," said Mr. Long. "There's nothing we can't handle."
Ms. Jee said centralizing supervision of large banks has made it easier for the trio to recognize potential problems. "Regional supervisors might not have communicated regularly when supervision was divided among six geographic districts," she said. "Now the three of us are constantly talking to each other, and we each are talking daily with examiners in every part of the country."
Each deputy comptroller's stable of banks includes one or two with major mergers under way. Ms. Jee oversees Citibank, whose parent Citicorp is joining with Travelers Group, and Bank of America, whose parent BankAmerica Corp. is combining with NationsBank Corp.
Mr. Long's portfolio includes NationsBank as well as Bank One and First National Bank of Chicago, whose parents are merging. Mr. Roeder's includes First Union National Bank and CoreStates Bank, which have just completed their deal.
The three deputies have compiled a list of potential worries for the examiners-in-charge to monitor.
For instance, bank executives may underestimate the transaction demand the merged institutions will face, leading to computer system breakdowns and processing errors. Also, management may be spread too thin to oversee all parts of a merger.
To head off disasters, regulators are pressing banks to make sure that deadlines for integrating various operations leave room for error and to keep tandem computer systems in place well after the merger is completed.
Another big worry is that bankers will be too eager to show quick bottom-line results and cut employee ranks too deeply. "We don't want senior bank managers so focused on merging operations that they forget to run their companies," Mr. Roeder said.
"Errors are going to occur, and they must have a plan of action so things don't spin out of control," Ms. Jee added.
The agency is also rethinking how it will supervise the giant new institutions.
Currently, resident exam staffs are based at an institution's headquarters. But with the new deals, major operations of one company may be based on opposite sides of the country, creating a logistical headache for examiners. For instance, the new Bank of America will be headquartered in Charlotte, N.C., but its international operations will be based in San Francisco.
"Examiners in charge are going to have to learn to manage staffs in remote locations," Ms. Jee said.