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Community Bank Supervision. ICBA opposes a counterproductive, adversarial approach to examination and supervision, in which community banks are exposed to legal and compliance risk for minor, inadvertent calculations or documentation errors. Not every minor suggestion made during an exam should be formally recorded as a “Matter Requiring Attention.”
Instead, these should be limited to violations of law, regulation, or material safety and soundness concerns. Examiners should use reasonable judgement and respect in the conduct of exams. A more flexible approach would allow for less guarded interactions and a more productive partnership between bank management and examiners.
Applying “Best Practices” to Community Banks. Examiners should not apply large bank practices to community banks that have a different, less complex, and more conservative business model. Examiners also should not criticize community banks in their final written examination reports for not complying with “best practices” unless the criticism involves a violation of bank policy or regulation. Industry “best practices” should be transparent and sufficiently known throughout the industry before they are cited in an examination report.
Exam Appeals. ICBA supports legislation that would reform the procedure for seeking review of an agency decision or action resulting from an exam, including classification of a loan, an exam rating, or the adequacy of loan loss reserve provision.
Currently, bankers can seek review of these actions or decisions within the agency internally or through its ombudsman’s office. However, these appeals are usually not successful. Furthermore, community bankers often choose not to appeal out of fear of retaliation.
ICBA supports legislation that would allow bankers to appeal to an independent council or ombudsman office that would prohibit any sort of retaliation against the bank for exercising its right of appeal.