Magazine article American Banker

House Bill Would Shield Results of Bank Exams

Magazine article American Banker

House Bill Would Shield Results of Bank Exams

Article excerpt

The House Financial Services Committee is scheduled to vote Wednesday on legislation that would better protect communications between regulators and financial institutions.

"The confidence that exists between bank examiners and depository institutions is important to making sure examiners get a true understanding and true picture of what is going on at an institution to be able to evaluate it," said Kevin Petrasic, director of congressional affairs at the Office of Thrift Supervision, which, like bank regulators, supports the measure.

Though courts have traditionally guarded the relationship between regulators and financial institutions, there is no national standard for confidentiality. As a result, both regulators and bankers say, they are concerned that an increasingly litigious society will erode these protections.

"It used to be that this material was considered pretty sacrosanct, but that is being worn away with time," said Lisa McGreevy, director of government affairs at the Financial Services Roundtable. "More and more, material that regulators gathered in exams is being requested by courts."

Regulators and industry officials could not give examples of the release of sensitive communications. Their concern, they said, is that only a handful of courts have addressed the matter.

A uniform national rule "would codify and expand the privilege that some courts have already recognized," said Jeff Lischer, a legislative counsel at the OTS.

For example, in 1993 the Court of Appeals for the District of Columbia Circuit recognized OTS documents as privileged communications in a case involving Society for Savings Bancorp Inc. of Boston.

But as courts began to make more frequent requests for material that supervisors obtained during exams in the mid-1990s, regulators began pressuring Congress to codify the protection of such material. …

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