Aging of Work Force Puts Banking Agencies in Bind (Corrected)

By Fajt, Marissa | American Banker, May 17, 2007 | Go to article overview

Aging of Work Force Puts Banking Agencies in Bind (Corrected)


Fajt, Marissa, American Banker


As baby boomers prepare for retirement, banking regulatory agencies could be facing an exodus that could leave them without many of their most experienced examiners and managers.

Federal and state agencies say they are monitoring the situation closely and adopting strategies including employee retention programs and the hiring of retirees as outside consultants.

But despite these measures, things could become dire in the next five years. For example, about 65% of the Office of Thrift Supervision's roughly 1,000 employees will be eligible to retire during that time.

"Assuming they retire, it is going to be a tremendous loss of institutional memory," said Gilbert Schwartz, a partner at the Washington law firm Schwartz & Ballen LLP.

The other agencies also face problems, though on a smaller scale. Around 32% of the Office of the Comptroller of the Currency's 3,000 employees and 30% of the Federal Deposit Insurance Corp.'s 4,500 employees will be eligible to retire soon. The Federal Reserve Board is in better shape; only 17% of its 1,700 employees will be eligible to retire by the end of 2011.

State regulatory agencies are in the same bind. Florida's division of financial regulation is attempting to hire more employees, because 30% of its staff will be eligible for retirement in the next five years, officials said.

It is, of course, a national labor issue. Baby boomers, those born between 1946 and 1964, number 78.2 million, or about 26% of the population, according to Census Bureau data. Because they make up such a big chunk of the population and are such big spenders and savers, their retiring in large numbers will have a big impact on the nation and the financial services industry.

Industry watchers said regulatory agencies appear to be taking appropriate steps, but there is one area over which they may have little control: the loss of expertise that will come with the loss of these employees.

The problem is particularly acute for examiners at regulatory agencies. Baby boomers examined banks during the economic downturn of the late 1980s and early 1990s, when hundreds of banks and thrifts failed. The succeeding generation has supervised the banking industry mostly during its most profitable times.

"My worry would be a large retirement at the agencies eliminates a large portion of the work force that was in the industry, either regulators or working for a bank, when we had credit quality problems in the late 1980s and early 1990s," said Jaret Seiberg, financial services policy analyst at Stanford Group in Washington. "That loss of perspective may be a problem."

The regulators say they have plans in place to withstand any large-scale departures, including increased hiring, entry-level recruiting, management training, formalized succession plans, and added incentives to keep baby boomers around longer.

Among federal agencies, the problem is most worrisome at the OTS, where a downsizing five years ago cost the agency many of its more junior members. Because of government rules, when the agency cut 250 positions, those with the most tenure were able to remain, while those with less experience left, said Kevin Petrasic, the OTS' managing director for external affairs.

The result is a staff heavily laden with baby boomers. Mr. Petrasic said the agency has anticipated the problem and hired roughly 200 employees in the past three years, with plans to hire more. Of the 650 workers eligible for retirement before 2011, the agency expects that only about 500 will actually retire in that time, he said.

Like other agencies contacted for this story, the OTS has been trying to make life better for examiners to improve retention. Agencies are taking examiners' personal lives into consideration - minimizing travel times, allowing flexible schedules, and letting examiners file reports from home. Federal regulatory agencies are considering keeping retiring examiners on in consulting and part-time postretirement roles. …

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