ABA Banking Journal Competitiveness Survey 2008 - (Page S23) Examinations (cont’d.) survived, though after a particularly bad exam, to be hauled before their regulator’s regional chief for a sweat session, to impress upon them the need for improvement. Will such days of raised voices and raised blood pressures return? Bankers responding to the was exam teams’ survey reported a shift in focus by #1 focus exam teams from Bank Secrecy Act compliance to commercial real estate lending issues, although BSA remained a very close second. (BSA is dealt with in safetyand-soundness exams.) Thus far, exams don’t seem to have grown toxic. Bankers were asked to report on safety-and-soundness exams conducted within 18 months of receipt of the survey questionnaire last fall. While some saw their CAMELS ratings fall, the shift in trend from past surveys wasn’t appreciable. What this will look like in 12 months, none can say. Some recent exams we’ve heard about, especially concerning commercial real estate, have been worrisome to the bankers involved. In late January, Comptroller John Dugan expressed major concern about community bank commercial real estate lending. And the same week, ABA leaders issued an ABA CEO Alert regarding CRE. Virtually all bankers reported continued good relations with their exam teams, although nearly one in five did consider their most recent exam harder than the previous one. Enterprise Risk Management continued to be a focus, even by exam teams visiting the smallest community banks, as shown in Exhibit 62. This year we asked bankers what the examiners seemed to be looking for from them in this regard. Overwhelmingly, as Exhibit 63 shows, having a written program and having a formal risk rating system were their prime expectations. Will the storm come in 2008? Exhibit 60 >How were relations with the exam team? Bad 2.6% said commercial real estate 38.7% Good 97.4% Exhibit 61 >Overall, your read on this exam? BY ASSET SIZE HARDER Under $500 million 17.4% $501-$999 million 16.7 $1 billion-up 34.2 Harder 18.5% (22.8%) Easier 10.9% (11.1%) 93.8% of the sample felt their CAMELS rating was fair. About the same 70.6% (66.6%) BY CHIEF FEDERAL REGULATOR AGENCY EASIER HARDER SAME 2007-2008 ABA/ABA BJ Survey Advisory Board Greg Burger, Minnwest Bank Luverne, Minn.; Dennis T. Cardello, Collinsville Savings Society, Canton, Conn.; Dennis T. Dorton, Citizens National Corp., Paintsville, Ky.; Randy K. Ferrell, Fauquier Bank, Warrenton, Va.; Thomas J. Flanagan, Jr., Citywide Banks, Aurora, Colo.; Corydon Nicholson, Hickory Point Bank & Trust FSB, Decatur, Ill.; Sheila Schauer, Four Corners Community Bank, Farmington, N.M.; and James E. Tibbetts, First Colebrook Bank, Colebrook, N.H. Exhibit 62 FDIC OCC FRB OTS 12.8% 6.7 4.5 13.2 17.8% 18.7 23.9 15.8 69.3% 74.6 71.6 71.1 Percentages in parentheses reflect 2007 survey results. Exhibit 63 >What seemed to be examiners’ main expectations for ERM?* Written program Risk rating system BY ASSET SIZE A GREAT DEAL SOME NONE AT ALL >How much emphasis was put on “Enterprise Risk Management”? A great deal 17.1% Some 55.1% None at all 27.8% 65.8% 54.4% Under $100 million $101-$200 million $201-$500 million $501-$999 million $1 billion-up 16.9% 20.5 14.5 18.6 13.5 45.4% 57 60.2 64.3 62.2 37.7% 22.5 25.3 17.1 24.3 13% Risk training 11.1% Risk committee 5% Outside expertise 4.7% Chief risk officer In banks over $1 billion, much more emphasis was put on “CRO”s. Almost 20% of those banks cited this as an exam point. BY CHIEF FEDERAL REGULATOR A GREAT NONE AGENCY DEAL SOME AT ALL FDIC OCC FRB OTS 17.1% 19.5 19.7 5.4 55.5% 53.4 59.1 45.9 27.4% 27.1 21.2 48.6 *Answered by banks reporting “a great deal” or “some” interest in ERM. They were asked for the top two expectations. Competitiveness Survey 2008 ABA BANKING JOURNAL/MARCH 2008 S23
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