Magazine article American Banker

Comptroller Says Many Bankers Are Acting Too Slowly

Magazine article American Banker

Comptroller Says Many Bankers Are Acting Too Slowly

Article excerpt

WASHINGTON -- Comptroller of the Currency John C. Dugan reiterated his concern Wednesday that bankers are not recognizing losses early enough, especially among commercial real estate credits.

"The real question is not whether problem assets are going to increase, but who is going to identify them - bank management or its examiner?" the comptroller said in a speech to the Exchequer Club here.

Mr. Dugan singled out community bankers, saying "denial is not a strategy" for them to follow.

"Right now too many community bankers are having too hard a time coming to grips with the problems that have emerged in their commercial real estate portfolios," he said. "While this resistance to recognizing problems at the beginning of an economic downturn may be human nature, it's not healthy, because denial is not a strategy. It won't serve anyone's interest in the long run. In fact, it only assures that problems get worse and harder to resolve."

Mr. Dugan suggested that these bankers take a variety of steps, including "reward loan officers for bringing problems to the attention of management early."

In addition to chiding bankers, he said his agency would not repeat the mistakes it made during the real estate bust of the late 1980s and early 1990s. "We've spent a lot of time reviewing and analyzing what went wrong in that period, and we've learned a lot from our mistakes," he said.

Rather than having examiners make "unilateral adjustments to real estate appraisals" that are outdated because of market changes, Mr. …

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