State Bank Examiners Ruffled by Fed Counterparts Posted by AVCU on 3:16 PM

The 2/9 issue of the Wall Street Journal reports on the increasing frustration by state level bank examiners with their federal regulator counterparts. As reported in  "Fed-Up State Commissioners Urge More Flexibility and Judgment,"  some observers are questioning whether the dual banking charter system is being weakened. As in credit unions, state bank regulators share oversight of state chartered banks with a federal counterpart - either the Federal Reserve or the FDIC.  In most states they take turns in the lead on field exams. But, the latest trend has been toward  federal regulators taking a more controlling role in supervision of state charters, likely due to the recent recession, which in turn has frustrated some state regulators.


80% of the banks in the country hold a state charter. But state banks' share of industry assets has been declining for decades . . . . now at about 1/3 of the $12.5 trillion total.  Some state commissioners are refusing to sign enforcement actions initiated by the Fed or FDIC, saying they are simply too severe.Topping the list of complaints is that Washington is preventing field examiners from exercising judgment, or as one state commissioner put it "using any common sense."


"The federal regulators paint banks with a broad brush and the state regulators look at them individually," said Mick Thompson, Commissioner of the Oklahoma Banking Department.  For long-time credit union career Vermont readers, the federal versus state bank challenge may sound reminiscent of federal versus state regulator challenges of the 1980's. In that era, it seemed federal credit union regulators were closing or involuntarily merging credit unions far in excess of what seemed amenable to state regulators. Read the WSJ article in full.