Regulators to bankers: We Hear You

Federal regulators are feeling the heat from community bankers fed up with the burden of increased regulations, and two of them made efforts to appease a crowd in Nashville last week attending the Independent Community Bankers of America National Convention and Techworld. More than 3,000 people attended the convention.

The Federal Deposit Insurance Corp.’s Acting Chairman Martin Gruenberg said he has begun a series of roundtables with small banks in each of the six FDIC districts across the country, and will review the exam and supervision process to make it better and more efficient.

“We are going to work very hard to understand community banks better,’’ he said. He added that he didn’t want to raise expectations unrealistically, but he thinks the agency can do better.

Bankers have been bristling under the weight of increased regulation following the financial crisis, including the passage of the Dodd-Frank Act in 2010 that has new rules for everything from compensation practices to the creation of a new Consumer Financial Protection Bureau that will define and forbid “abusive practices” among financial institutions.

Although many of the new regulations are supposed to apply only to large institutions, with the CFPB applying to banks and thrifts with more than $10 billion in assets, Eric Gaver, a director at $500-million asset Sturdy Savings Bank in New Jersey, said he’s skeptical.

“The general trend is [regulations meant for big banks] become a best practice for small institutions on future exams,’’ he said.

Regulatory exams have been a crucial point of frustration, as more than 800 banks and thrifts are on the FDIC’s list of “problem” institutions requiring special supervision. In response, U.S. Rep. Shelley Moore Capito (R-West Virginia), and Carolyn Maloney (D-New York) introduced last year the Financial Institutions Examination Fairness and Reform Act (H.R. 3461), which would allow bankers to appeal exam decisions to a separate ombudsman.

The ICBA is supporting the idea of a separate appeals process and ombudsman.

However, Acting Comptroller of the Currency John Walsh stood up before the ICBA crowd Tuesday and defended the existing review process in the face of the proposed legislation.

“We have long supported the notion that bankers deserve a fair and independent review,’’ he said, adding that the Office of the Comptroller of the Currency (OCC) Ombudsman Larry Hattix is independent of the supervisory process and reports directly to Walsh.

Appeals can be viewed on the OCC’s web site, which lists only five appeals since the start of 2011. Of those, the ombudsman sided with examiners in four of the five.

Walsh said that “as regulators, we don’t expect to be loved,” but that he can promise there shouldn’t be any surprises about how the OCC approaches the exam.

Walsh disputed rumors that regulators want to reduce the number of community banks and thrifts in the country.

“I can assure you the OCC is deeply committed to community banks and thrifts and the goal of our institution is to make sure your institutions remain safe and sound and able to serve your communities,’’ he said.