As the government's new deputy comptroller for credit risk, David G. Gibbons is on the lookout for lending gone wrong.
"Everybody is talking about credit risk, but it is difficult to measure," Mr. Gibbons said. "We have to do some pinpoint analysis to find out exactly what the problems are."
Mr. Gibbons, 41, said he plans to focus first on installment credit, an area where underwriting standards have been slipping for some time. But translating findings at particular banks into industry trends is a big challenge, according to Mr. Gibbons.
"Each bank has different underwriting standards," he said. "One bank's slippage is another's normal standard."
To do the job, Mr. Gibbons is assembling a team of roughly 10 field examiners with extensive experience supervising national bank credit operations.
Wayne Rushton, senior deputy comptroller for bank supervision policy, said he created Mr. Gibbons' position because loan portfolios contain the most significant risks at nearly every national bank. "Rather than have that responsibility merged in with other types of risk, we decided to devote more specialized attention to it," he said.
Mr. Rushton said Mr. Gibbons was selected for his field experience and ability to recognize industry trends.
"Dave has that unique combination of being a very strong technical expert in credit" who can also see the big picture, Mr. Rushton said. "He will be a great help to me and others in figuring out an effective way to communicate with bankers the potential risk we see in their portfolios."
Industry representatives agreed.
"He's very thoughtful and has extensive background as a field examiner," said Allen Sanborn, president of Robert Morris Associates. Mr. Sanborn was vice chairman and chief lender of Shawmut National Corp. from 1992 to 1994, when Mr. Gibbons was the institution's chief examiner.
"Bringing Dave aboard in this capacity is the comptroller's way of anticipating that credit risk weaknesses become very evident in economic downturns," Mr. Sanborn said.
Gunnar S. Overstrom, vice chairman of Fleet Financial Group, described Mr. Gibbons as "smart, energetic, and committed to the early identification and resolution of any issues which may present undue risk to banking." Mr. Overstrom was Shawmut's chief operating officer when Mr. Gibbons' worked there.
Mr. Gibbons supervised small banks when he joined the Office of the Comptroller of the Currency in 1977 as an examiner based in Syracuse. But by 1986 he had moved to Boston and was supervising the likes of Fleet, Shawmut, and Bank of Boston.
Once the Northeast settled down, the agency temporarily dispatched Mr. Gibbons to Texas to help manage banks hit by the real estate crisis.
"I learned a few things about real estate lending, just in time to come back to Boston and realize I'd be making use of some of that education," he said.
Mr. Gibbons also has first-hand experience with industry consolidation. He became examiner-in-charge of Chase Manhattan Bank in May 1995 and moved into a new house in New Jersey on July 21. A month later, Chase and Chemical Bank agreed to merge and use a state charter.
"After that I got a lot of phone calls and E-mails from examiners saying, 'Please don't come work at our bank,'" Mr. Gibbons said with a laugh. Joking aside, he said it was a sobering situation, especially for the 18 examiners who worked for him.
"They were devastated," he said. "I had to put my own issues aside and make sure they all had places to go and were counseled."
After shutting down the agency's office at Chase, Mr. Gibbons became acting Southeast district administrator. Three months later, he came to Washington to head a program measuring the effectiveness of the OCC's large-bank supervision.
In May he was tapped for his current job. His revision of installment credit exams should be completed by yearend. Under the new procedures, exams will scrutinize several distinct risks such as credit, interest rate, and operational risk, Mr. Gibbons said.
"The fundamentals of the exam won't change too much, but it will be organized in a better, risk-based way," Mr. Gibbons said.
He also is working on detailed guidelines on how banks should improve their management of credit risk. The guidelines, which will build on a March advisory letter, will be released within three months, Mr. Gibbons said.
The OCC will urge bankers to better monitor their loan portfolios' exposure to sudden fluctuations in interest rates, for example. The guidelines also will suggest that bankers stress-test their loan portfolios to see what would happen if a recession occurs.
"This is just another piece of our effort to start preparing banks for the inevitable economic downturn."
