Academic journal article ABA Banking Journal

Restoring Fairness to Bank Exams

Academic journal article ABA Banking Journal

Restoring Fairness to Bank Exams

Article excerpt

ABA is working to turn the ride of regulatory overreach so your bank can fulfill its vital role in fueling economic growth and job creation. We should expect federal banking regulators to aid the industry and individual banks, not damage the very industry they should champion.

Improving banker rights in the examination process is at the top of our list of changes needed. That's why ABA is backing H.R. 3461, the Financial Institutions Examination Fairness and Reform Act, introduced by Reps. Shelley Moore Capito (R-W.Va.) and Carolyn Maloney (D-N.Y.). The bill goes a long way toward restoring exam consistency, fairness, and transparency.

A new, independent interagency ombudsman would be established to help ensure the consistency and quality of all exams. In addition, the bill would provide for appeals to a special administrative law judge. This represents access to due process, which should be deemed fundamentally fair by all.

Further, regulators would have to provide more timely exam reports and more information about the facts on which an agency based its decisions. Exams, generally, would be completed within nine months, and reports provided no later than 60 days after an exit interview.

The bill also would help bankers lend and stimulate job growth by curbing examiners' ability to unilaterally ratchet-up capital or lending requirements. The bill specifies, for example, that well-capitalized banks must not be required to raise additional capital beyond what is required by regulation, and a commercial loan could not be placed in nonaccrual status solely because the collateral has deteriorated in value. …

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