Academic journal article ABA Banking Journal

With Disasters, Forbearance Is OK: Examiners Take FDIC Guidance to Heart, but It's Still a Judgment Call

Academic journal article ABA Banking Journal

With Disasters, Forbearance Is OK: Examiners Take FDIC Guidance to Heart, but It's Still a Judgment Call

Article excerpt

[ILLUSTRATION OMITTED]

Despite the hotly discussed disconnect regarding what regulators in Washington tell bankers, and what field examiners do, there's at least one area where the two tend to agree--guidance after natural disasters.

After most major disruptions, FDIC sends out financial institution letters advising banks in the affected areas to "work constructively with borrowers who are experiencing difficulties beyond their control."

Conversations with bankers along the Texas Gulf Coast indicate that for the most part, field examiners take such guidance to heart.

In September 2008, the Texas coast was slammed by Hurricane Ike, a category 2 storm 435 miles wide that pushed 10-14 feet of water over the barrier islands. "We had tons of businesses affected," says Victor Pierson, president of Moody National Bank, Galveston.

"I would say that our regulators acted in both the letter and the spirit of the guidance and allowed us to work with our borrowers," Pierson says. Key to that cooperation was the communication the bank maintained with the examiners.

"We kept our primary regulator informed of everything we were doing and how we were working with borrowers. …

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