The California Department of Financial Institutions is turning the tables on the famed Camels rating — it is asking bankers to rate its examiners on six indicators of performance.
The department decided this year to revise its exam assessment process; the 38-question Post-Examination Survey debuted in an agency newsletter Sept. 1.
Bankers are grading examiners on competency; advice; whether the examiner focused on “meaningful” issues; efficiency; whether the examiner listened to bankers; and whether the examiner showed “strong leadership” by supervising as professionally as possible.
Examiners will be rated in each of the six categories, and they will receive a composite score. The average ratings will be calculated and published quarterly on the department’s Web site.
The federal acronym Camels, as just about every banker knows, stands for capital adequacy, asset quality, management, earnings, liquidity, and sensitivity to market risk. Regulators grade banks on each component using a scale of 1 to 5, with 1 being the best score.
Neil Milner, the president and chief executive officer of the Conference of State Bank Supervisors in Washington, said most state regulators have some of form of post-examination questionnaire, but only a handful publish the results.
No other state has conducted a survey that echoes the Camels system, he said.
Howard Gould, who became the California department’s commissioner in March, said he wanted to replace the Quality Assurance Survey, so bankers could readily see how well — or how poorly — examiners were performing.
“We have a major initiative to make our performance known to the industry, and we wanted to have our rating system mirror that of banks, because they understand that so well,” Mr. Gould said.
Structuring the survey around six concepts also makes it easier for examiners to understand what is expected of them, he said.
Bankers who have seen the survey generally had a positive response.
Larry D. Hartwig, the CEO of $38 million-asset California Community Bank in Escondido, said this is first time in his 40-year career that the state regulator has asked bankers whether examiners advised them on how to better manage their institutions. Not so long ago examiners would scold banks on troublesome issues without offering them any guidance on improving their performance, he said.
“Before, I sort of likened it to throwing a dart toward a board in a dark room,” Mr. Hartwig said. “Now they’re more willing to share the best practices of the industry with us.”
The department has “come a long way” since the early 1990s, when examinations were tense and “one-sided” and often took up to five weeks to complete, he said. Now examiners are much more willing to listen to a banker’s point of view, and on-site examinations usually take about two weeks, because bankers mail requested documents to examiners before the exam, he said.
“I think there’s a genuine thrust of the part of the regulators to make some meaningful improvement,” Mr. Hartwig said.
Thomas H. Shaffer, the president of 1867 Western Financial Corp. in Stockton and the chairman of the California Bankers Association, said that by asking bankers to grade examiners, the department is proving that bankers’ input matters.
“Before, there was a general feeling to not be too critical of the regulators, because they always come back next year,” Mr. Shaffer said. “But now I think they want to get some realistic feedback.”
