The New Team in Banking Supervision and Regulation at the Federal Reserve Board
Alan Greenspan's retirement from the Federal Reserve Board is not the only major change that has taken place at the Board lately. The long-time director of the Division of Banking Supervision and Regulation, Richard Spillenkothen, also retired, and a new team has been put in place. Roger T. Cole now leads the division and has created three new deputy director positions, where only one existed before: 1) Supervision Program and Risk Management, headed by Deborah P. Bailey; 2) Accounting, Policy, and Quantitative Analysis, headed by Steven M. Roberts; and 3) Technology, Quality Assurance, and Staff Development, headed by Peter Purcell. The RMA Journal sat down with three members of the new crew in Sup&Reg, as it's called at the Board, and talked about what sort of changes, if any, the industry can expect with a new team in place.
RMAJ: There are now three deputy director slots where there was only one before. Can you tell us why you made the change?
Cole: The key thinking behind the move was that the three deputies provide a wide breadth of coverage overall and each has significant expertise in their area. Deborah has considerable examination experience and brings a lot to bear there, and Steve has a huge amount of experience with public policy issues. Peter Purcell has a lot of experience in IT, and bringing IT and staff development together is very useful in terms of developing synergy in that area. Given the key people that were available and what we want to accomplish, it makes good sense.
RMAJ: Have there been other, perhaps less visible, changes to the supervisory process within the Federal Reserve System relating to banking regulation and supervision?
Cole: Yes, a lot of what we are trying to do is to provide for succession planning going forward, and to create a good set of areas of expertise focusing very significantly on financial and quantitative analysis--that's so important in terms of the rapid evolution of financial markets and products. We are also creating more teamwork and leadership development opportunities in the division.
RMAJ: So there are still perhaps more changes to come?
Cole: Yes. I think this is a continuing process. We also implemented a committee structure that helps coordinate the division's work. The structure includes a Risk Committee and an Operating Committee that report to senior division leadership.
Roberts: The focus that I keep coming back to is enhancing corporate governance of the supervisory and regulatory function, both here at the Board and in the Reserve System, and clarifying roles and responsibilities. Risk identification and assessment is a key part of our business, so that is an area where we really have to focus more time and attention. It is very important for us to gather the information available throughout the Federal Reserve System and bring it together for consideration here at the Board.
Bailey: There is a tier of very strong officers on the Operating Committee and the Risk Committee, and we rely on them to help oversee this function and to provide analysis and recommendations so that the Board can make informed decisions.
RMAJ: Let's turn now to the industry itself and what you see in the institutions you examine. RMA's members have been telling us for the past two years that things are not going to get better in terms of credit quality--meaning they can only become more challenging. Do you think we've reached the turning point in the credit cycle?
Bailey: In my job I look at holding companies and other supervised institutions in terms of safety and soundness. I cannot really say at what point the cycle turns or changes. But what we still see, particularly in the credit markets, is that credit quality is still very good. We are seeing an increasing level of classified and non-performing assets in some areas, but they are still near their recent historical lows. …