Tough Exams Raise Hackles Of Smaller Western Bankers

LOS ANGELES - Independent bankers in the West are increasingly complaining about the quality and conclusions of regulatory examinations, according to survey data released Friday.

The survey, by the Western Independent Bankers Association, showed 55% of bankers who had been through an examination in the last year thought the exam's tone was constructive.

The percentage was down from 62% a year ago. The more adversarial relationships may be discouraging the new bank lending that Washington-based policymakers are hoping for.

Smaller Banks Predominant

The Western Independent Bankers polled executives in nine states in October. Of 212 respondents, 92% represented banks with less than $500 million in assets.

The association previously released the finding that 43% of respondents, and 56% in the more recessionary parts of north and central California, were not making loans to creditworthy borrowers because of the tough regulatory climate.

Thirty-six percent of the bankers found the examination process "somewhat adversarial," up from 30% a year ago, and 7% thought it was downright hostile, up from 5% a year ago.

Exactly 50% said their exams were more stringent than in 1990.

"We hear horror stories every day," said Scott Burford, president of Burford Capital, a Los Angeles investment banking firm that deals with small banks.

The number facing enforcement actions increased to 25% from 15% in 1990. Of the 25%, more than half - 56% - said they felt the enforcement action was harsher than circumstances warranted; 15% said it was entirely unwarranted.

And 35% - up from 29% in 1990 - said that the tone and content of written examination reports were different from what in-person meetings led them to expect.

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