Small Banks Told Not to Let Federal Regulatory Agencies Bully Them; Fight Back, Says Independents' Lawyer

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Small Banks Told Not to Let Federal Regulatory Agencies Bully Them; Fight Back, Says Independents' Lawyer

Small banks should not let federal regulatory agencies bully them into consenting to enforcement actions, the top lawyer for the Independent Bankers Association of America said Monday.

"If a banker consents to informal written agreements or cease-and-desist orders, he has signed a confession,' said Leonard J. Rubin, the association's general counsel.

"The effect is you're waiving procedural rights that the statutes say you have.'

Mr. Rubin, who also is an attorney for the Washington law firm of Becker, Gurman, Meyers, O'Brien & McGowan, made the remarks at a session on federal bank regulatory powers and procedures. The talk was part of the IBAA's annual meeting, which will continue here through Thursday.

Between 1971 and 1976, the Office of the Comptroller of the Currency instituted a total of 91 enforcement proceedings against national banks, Mr. Rubin said.

In 1981, he added, the number rose to 128 and in 1982 to 175.

During the first six months of 1983, the latest date for which figures are available, the Comptroller's office instituted 171 enforcement actions.

Of the 175 enforcement actions against banks in 1982, 150 were for banks with assets under $100 million. Of the 171 enforcement actions in the first half of 1983, 138 were against small banks.

The high percentage of small banks involved in enforcement proceedings can partly be explained by the fact that there are simply more small banks than large ones.

Still, Mr. Rubin said, the small bank percentages are "astonishingly high. Small banks are clearly on the wrong end of the enforcement proceedings,' he added.

"The official explanation is that the small banks don't have the management resources to deal with asset-quality problems, and they don't have staff counsel to review compliance,' the IBAA attorney said.

The real reason is that small banks do not fight the enforcement proceedings, Mr. Rubin added.

"You know it, and the regulatory agencies know it,' he said.

Know Your Rights

Because enforcement proceedings are as time-consuming for the regulators as they are for the banks, the agencies count on the consent of small banks, the attorney said.

Mr. Rubin noted that there are rights and liabilities associated with enforcement proceedings.

"The regulators never point out the rights or the consequences of not asserting those rights,' he said. …