Magazine article American Banker

Hawke Tells Banks to Get Busy with Corporate Reforms

Magazine article American Banker

Hawke Tells Banks to Get Busy with Corporate Reforms

Article excerpt

Three top regulators appeared before the American Bankers Association's annual convention in Phoenix on Monday, and though two were content to pat the industry on the back, the third used the podium to deliver a kick in the pants.

Treasury Secretary Paul O'Neill and Federal Reserve Board Chairman Alan Greenspan offered generally reassuring comments about the strength of the industry in the face of a poor economic climate, but Comptroller of the Currency John D. Hawke Jr. stood before 1,300 bankers and said they should reform their corporate structures before the government does it for them.

The rise of huge financial conglomerates, he said, has regulators concerned that parent companies might take advantage of subsidiary banks' assets, both tangible and intangible, to benefit other parts of the corporation.

"When an insured depository institution engages in transactions involving its parent or affiliate or insiders, who speaks for the bank?" Mr. Hawke asked. "Who in the corporate family is looking at these situations solely from the perspective of the bank, with an independent view and with undivided loyalty to the bank?"

Bank boards, Mr. Hawke said, must be better insulated from pressure to subordinate the interests of the bank to those of the corporate parent.

"What I perceive to be the currently prevailing patterns - either replicating all or part of the holding company board at the bank or using bank officers, who may also be holding company officers, to comprise the bank board - does not assure the kind of independent view that I believe is needed," Mr. Hawke said.

He urged the industry to take steps to ensure such independence. "If you don't, the process of government policymaking will inevitably move forward, resulting in new requirements," he said.

Mr. Hawke chided bankers for failing to get ahead of policymakers. …

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