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Powell Addresses Economic Growth, Corporate Governance

MARCH 7, 2003


Powell Addresses Economic Growth, Corporate Governance

Addressing the ICBA National Convention & Techworld in Orlando, Florida on Wednesday, FDIC Chairman Don Powell said the economy is poised for a broad-based recovery once the obstacles of continuing geopolitical uncertainties and lingering concerns about corporate governance are overcome. He also announced a series of corporate governance initiatives the FDIC is undertaking to assist bankers and bank directors.

Both the current threat of war, and the loss of investor confidence that followed the Sept. 11 attacks and the corporate and accounting scandals, have created a climate of uncertainty that has become the most serious impediment to economic growth, Chairman Powell said. "Risk can be estimated and priced. Uncertainty, cannot," Chairman Powell observed. "In a climate of uncertainty, investors, consumers, and business executives tend to postpone important transactions until the future appears more predictable." Prospects are good for resolving these uncertainties in 2003, Powell said, with no lasting damage to the economy.

The bank and thrift industries learned many lessons about managing risk a decade ago, Powell said. "As a result, the banking industry has weathered commercial credit losses during the recession perhaps better than could have been expected." In fact, FDIC-insured institutions earned a record $105.4 billion in 2002-the first time industry earnings have topped $100 billion, Powell said, noting this achievement occurred during the height of last year's corporate governance scandals.

Corporate Governance. Chairman Powell also announced a series of four initiatives the FDIC is taking to help banks understand corporate governance responsibilities. First, the FDIC has issued guidance on the "Effect of the Sarbanes-Oxley Act of 2002 on Insured Depository Institutions." Powell reminded the assembled bankers that Sarbanes-Oxley will primarily affect publicly traded banks, and that many of the Act's new requirements are already addressed in existing bank regulations and policy statements. For banks over $500 million in assets that are not publicly traded, the impact will be focused on their independent auditors.

Other steps the agency is taking include: a voluntary director-involvement program where bank directors participate in regularly scheduled meetings with examiners to stay informed about regulatory issues facing the bank; a "Director's Corner" on the FDIC Web site to gather together agency guidance of interest to bank directors, including a "Pocket Guide for Directors" with practical guidance on duties and responsibilities; and expansion of the "Director's College" program with training for new directors and refresher courses for long-time directors.