In Wayne Rushton's world, loan quality counts for more than a banker's word.

"It's not enough to read a bank's policies and analyze its reports," said the man who decides how national banks are examined. "We have to actually verify the validity of representations made by bank management."

Mr. Rushton, a career examiner at the Office of the Comptroller of the Currency, was recently reeled back to the agency's headquarters here to be senior deputy comptroller for bank supervision policy.

While most regulators rely on formal policies to communicate with bankers, Mr. Rushton said regulators should not take themselves too seriously.

"So many examiners fail and are absolutely compromised in their effectiveness because they tend to think a little too much of their authority," he said in a recent interview. "Their credibility is diminished, and it is an immediate turn-off to the banker."

Last week, Mr. Rushton, whose full name is Emory W. Rushton, sent a letter introducing himself to national bank chief executives. "This is the first in what I anticipate will be a series of informal messages," he wrote.

He succeeds Susan Krause, an economist who approached the supervision policy job more deliberately. "Wayne is impatient to act, whereas Susan was comfortable with more prolonged deliberation," is how one agency insider put it.

Mr. Rushton is likely to change the way national banks are examined. "Some of our examiners-especially the younger ones who have never been through a downturn-don't really know how to deal with a banker in bad times, when things aren't quite as friendly or harmonious," Mr. Rushton explained. "I don't think they're learning too much when the bank is making ROAs of 200 basis points."

Good times can't last forever, so Mr. Rushton said he wants to prepare the agency's 1,900 examiners for an economic downturn.

While he backs the OCC's new risk-based exams, Mr. Rushton said, he is concerned that examiners are not checking enough loan files. "Supervision by risk contemplates not doing a lot of that testing and verification, but I believe there is room for a balance there," Mr. Rushton said. "It is absolutely essential that we do more of that going forward.

"'Trust but verify' is my buzz phrase when I talk with examiners."

The 32-year OCC veteran has been through bad times before. Mr. Rushton shuttered banks in oil-busted Texas in the 1980s, sold assets of failed thrifts for the Resolution Trust Corp., and steered large Atlanta banks through the real estate investment trust crisis of the mid-1970s.

"Because he has seen it all, Wayne has the antennae to pick up the signals of potential problems before they turn into real problems," said OCC Chief Counsel Julie L. Williams.

Mr. Rushton said he already sees some worrisome-and familiar-signs. To maintain high earnings, banks are cutting expenses. Among the first things to go are internal loan reviews and other controls, he said. "Bankers just call it trimming the fat," Mr. Rushton said, "but we don't want them to cut too close to the bone."

Mr. Rushton also is concerned that problem loans are growing while loan- loss reserves are declining. "These two levels should be moving in tandem, but they're not," he said.

As banking becomes more sophisticated, examiners need better training, he said. The Comptroller's Office plans to hire or consult with experts from various fields to teach examiners about new products and services.

"It's like that old Bob Dylan song where he says, 'Don't criticize what you don't understand,'" Mr. Rushton said. "Most of the activities that we'll need to go outside for more expertise are in these more nontraditional activities, like insurance underwriting."

The tall, lean 54-year-old has a creased face and a gentle Southern drawl. Those who know him describe Mr. Rushton as a no-nonsense character.

"Wayne is tough, but fair," said Richard K. McCrea, senior vice president for credit policy at SunTrust Banks Inc., Atlanta.

Mr. Rushton was SunTrust's chief examiner from 1993 through May when he moved back to OCC headquarters here.

"He maintained a professional distance as a regulator but worked very hard to understand the unique features of our bank," Mr. McCrea added. "He's uniquely qualified for his new post because of a strong combination of deep knowledge, field experience, and Washington experience."

Mr. Rushton first worked in Washington in 1983 as director for multinational and regional supervision. In 1986, he was promoted to deputy comptroller for multinational banking. In that post, he oversaw the examiners who were scrutinizing banks losing money in the Texas oil crisis, and directly handled the worst cases.

The main lesson he learned from that experience: Be proactive.

"If we are going to have any real effect in terms of minimizing or eliminating costs to government, we have to get involved early," Mr. Rushton said.

Robert L. Clarke, who was comptroller then, said Mr. Rushton handled the crisis calmly.

"He sifted through the reports about those banks and came up with very sound recommendations for what we should do about them," Mr. Clarke said. "He presented a very balanced view-he never overreacted but was candid about the seriousness of problems."

Mr. Rushton was Mr. Clarke's liaison to the Resolution Trust Corp. when that agency was created in 1989 to close hundreds of troubled thrifts.

Helping to sell billions of dollars of thrift assets instilled a sensitivity to problem trends in real estate lending, he said. "From having done post-mortems on a lot of failed thrifts, I can spot practices that national banks should avoid."

Mr. Rushton started his OCC career in 1965, after graduating from the University of South Carolina with a degree in banking and finance. He spent a decade as a national bank examiner in Columbia, S.C., then moved to Atlanta in 1975 to supervise large banks based there.

Beyond his extensive experience and knowledge of the banking industry, Mr. Rushton has at least two other talents. First, he's an accomplished guitar player and owns several handmade Martin acoustic guitars.

"I've heard him play a few times, and he's a fairly formidable bluegrass player," said another guitar aficionado, John P. Ehrensperger, SunTrust's corporate compliance manager.

Second, he raises prize-winning hostas, broad-leafed plants that range widely in size and color. The goal is to cultivate a flawless leaf to be placed in a display bottle and judged. The catch: The plant cannot be safeguarded indoors.

"You have to identify the leaf with all the right attributes weeks before the show and then protect it," he said. "Even a pine needle falling out of a tree and hitting the leaf could disqualify it."

Of the several hundred plants in the backyard of his Atlanta home, one yielded a leaf that took second place last year in the city's Hosta Society show. Mr. Rushton said he plans to dig up his prized plants in September and bring them to his new home here, but for the time being, he only gets to visit them once a week.

"I go home to Atlanta on the weekends and talk to them," he said.

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