Burdened by high turnover rates and desperate for experts in specialized fields, federal regulators are scrambling to add more than 500 new examiners this year.

The recruiting drive comes after several years of attrition among the exam forces, as downsizing forced federal agencies to put new hires on hold. Now turnover among examiners-about 10% quit each year-is forcing regulators to search for highly skilled and costly replacements in a tight labor market.

The agencies are most in need of staffers with depth in fields such as capital markets, compliance, and technology.

"Our focus is bringing in people with special skills," said Leann G. Britton, senior deputy comptroller for bank supervision operations. "In the past we've hired people right out of college, but now we're trying to hire experienced bankers. We find they make excellent examiners."

The Office of the Comptroller of the Currency plans to hire 250 examiners this year, she said, the first net additions to its exam staff in four years.

And the agency is not alone:

The Federal Deposit Insurance Corp. plans to hire 200 examiners this year, the first time it has added examiners from outside the agency since 1992.

The Office of Thrift Supervision plans to hire 25 new examiners, boosting its 425-person exam force by 6%. "This is most significant recruiting we've done in years," said an OTS spokesman.

The National Credit Union Administration is training 26 new examiners, primarily to cover year-2000 inspections, and plans to have another 15 or so on board by the end of the year.

Only the Federal Reserve is expecting business as usual on the hiring front. Though the Federal Reserve banks also experience high examiner turnover rates-about 15% annually-active recruiting efforts in recent years have put the banks under less pressure to step up their hiring now, officials said.

The attrition of recent years isn't the only reason for the examiner recruiting push. Other factors are the increasing demands of year-2000 compliance reviews and the technical skills needed to implement new supervision-by-risk policies, which are intended to ferret out problems before they damage a bank's financial condition.

Recruiting by banks is complicating the agency's hiring efforts, regulators said, because experienced examiners who join the private sector can earn top dollar and spend more time at home.

"We put a lot of training into our examiners during their first five years on job," Ms. Britton said. "That makes our people incredibly attractive to the private sector."

Also, as financial institutions grow through mergers, their business lines are getting more complicated and traditional lending is becoming less important, Ms. Britton said. Bankers attest that this is changing the job of an examiner.

"There has been tremendous growth in new lines of business and that requires specialized training and experience," said Dorothy M. Horvath, executive vice president at National City Bank, Columbus, Ohio. "A decade ago, one general examiner could review a small group of products with sufficient knowledge. Among large banks today, that isn't the case."

Dennis Geer, the FDIC's chief operating officer, said the life of an examiner takes its toll. "There's a very high attrition rate. Most these people are on the road all the time."

The FDIC wants to boost its supervision staff to more than 2,750 employees in 1998 because downsizing and a hiring freeze left the division understaffed.

Mr. Geer said the agency's supervision division will hire about 190 examiners and the compliance and consumer affairs division will add 10. He said the FDIC has exhausted the pool of FDIC employees who want to be retrained as examiners.

The OTS needs new examiners primarily to help review thrifts' year-2000 compliance efforts. The agency has launched 808 year-2000 exams so far this year and must complete 1,200 of the reviews by the end of 1998. The hiring increase will also let more examiners be cross-trained in safety-and- soundness and information system specialties.

To ease the personnel crunch, the OTS is also seeking 11 mid-career professionals working at business schools, thrifts, and trade groups to serve as regulatory fellows. The agency wants experts in risk management, trust operations, credit scoring, and other fields who would be willing to work at the agency for up to 15 months.

One thrift executive said he saw a clear need for more inspectors. "The examiners are very busy and understaffed," said Lee B. Murphey, executive vice president of First Liberty Bank, Macon, Ga.

At First Liberty's most recent federal review, he said, thrift examiners waited 12 months-rather than the usual 10-before beginning their annual inspection. And regulators increasingly rely on banks' internal audits to verify compliance with lending and other types of rules, said Mr. Murphey, who is also vice chairman of Robert Morris Associates.

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