New software in use in Minnesota and being tested by federal regulators aims to reduce the burden and cost of bank exams.
Inasyst Inc., Burnsville, Minn., has released the initial segment of X- Am, a software program that allows banks to organize information in a data base and gives examiners access to the information upon request.
The goal, according to Inasyst executive vice president James A. Dosen, is to cut down the time and travel involved in examinations.
"The Federal Reserve has indicated that they want examinations to be done more off-site in the future," Mr. Dosen said in an interview. "It's a question of when, not if. It's the wave of the future."
The Minnesota Department of Commerce, which sent the first of 12 modules to state banks this month, is the first agency to catch the wave.
The system, created by Mr. Dosen and Inasyst president and chief executive Ronald L. Ingersoll, organizes bank files and allows examiners to download all bank records kept routinely on an institution's mainframe computer. The PC-compatible program allows examiners to do much of their work in their own offices - rather than on-site at the bank.
The first program allows banks to complete questionnaires and checklists to be submitted to agencies electronically before an exam begins. Mr. Dosen said 411 state-chartered banks were sent the first phase of the product, including Riverside Bank, Minneapolis.
Crystal Hatcher, internal auditor at Riverside, said the planning phase includes forms for responding to an electronic data processing questionnaire, as well as providing a format to list names of bank directors, officers, and other employees, along with their salaries and what stocks and loans they hold.
Mr. Dosen said the second unit, for organizing and storing loan information, is completed and will be sent to Minnesota state banks later this month.
The remaining 10 units, which Mr. Dosen said he expects to have available within 15 months, are: loan risk rating and review; investments, operations, and accounting; deposits, funds management asset/liability; examination wrap-up and report writer; and compliance.
Compliance will be one of the final issues to be addressed, Mr. Dosen said. Eventually, he said, all of the modules will add up to a nearly complete off-site examination.
Inasyst has been invited to demonstrate its product to all 12 Federal Reserve banks. The company also has given a presentation to the Office of the Comptroller of the Currency, and sent a trial copy to the Federal Deposit Insurance Corp.
Northwoods Bank of Minnesota in Park Rapids was the first bank to use the product, participating in its testing. Northwoods president and CEO Mark Hewitt said the product proved effective.
"I feel like I've been given an opportunity to witness the future," Mr. Hewitt said. "It provides us with an advantage to apply today's technology to a time-intensive approach which will benefit bankers and banking officials alike."
Riverside's Ms. Hatcher said the product should help save time. However, she added, compliance may be more difficult to incorporate into off-site examinations.
"Compliance has some hard issues to deal with," Ms. Hatcher said. "In compliance, often you have to review the actual, physical documents, like credit denial forms. I don't know if you could do something like that off- site."
