How reserves are set, assets securitized, and internal controls maintained are the subjects of a letter the Office of the Comptroller of the Currency sent to national banks Tuesday.

Emory W. Rushton, appointed senior deputy comptroller for bank supervision policy last month, said he plans to write often to keep bankers informed of the agency's concerns.

"One of our most important jobs as bank supervisors is to anticipate change in the banking system in such a way that we can assist bankers in preparing for the future," Mr. Rushton wrote. "This is the first in what I anticipate will be a series of informal messages."

At the top of the 32-year agency veteran's list is loan-loss reserves, which have been steadily declining for four years. "Certain measures of allowance coverage are beginning to decline at the same time certain credit quality indicators appear to be deteriorating," wrote Mr. Rushton, who goes by the name Wayne.

In guidance expected soon, the agency will instruct bankers to base reserves on current and future market conditions, not what has happened in the past, he explained in an interview.

Mr. Rushton also reminded bankers to maintain solid underwriting standards on loans feeding asset securitization pools, noting the agency this summer will give its examiners comprehensive instructions on supervising this growing business.

Finally, Mr. Rushton said, examiners will redouble oversight of internal controls, which he called "the linchpin of sound banking." The agency will update its guidelines in this area by including specific procedures for testing and evaluating controls governing products and activities.

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