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DOCUMENT '7SUME
00278 - (A0751124]
Federal Supervision of State and National Banks [Vol. II: E- n
Body of Report]. OCG-77-1; B-114831; B-118535; B-168904, January
31, 1977. 1 vol. (various pagings).
Report to the Congress; by Elmer B. Staats, Ccmptroller General.
Issue Area: Federal Regulatory Activities (30C0); Accounting and
Financial Reporting (2800).
Contact: Office of the Comptroller General.
Budget Function: Miscellaneous: Financial Management and
Information Systeus (1002); General Government: Central
Fiscal Operations (803).
Organization Concerned: Federal Deposit Insurance Corp.; Federal
Reserve System; Department of the Treasu-y; Cffice of the
Ccptroller of the Currency.
Act.iority: National Banking Act (12 U.S.C. 21-27). Federal
Depeslt Insurance Act (12 U.S.. 1016).
Several congression&l committees requested the
evaluation of the effectiveness of the supervisory efforts of
the three Federal agencies involved in monitoring banking
operations, because of the increasing instability of banks. The
study objectives were to evaluate the agencies* efforts to
identify insovnd conditions and violations of laws in banks, and
cause bank management to take corrective actions. Examination
reports and correspondence files on more tha.n 900 banks
supervi-ad by FDIC, Office of the Comptroller of tke Currency,
and the Federal Reserve Boards were examined, including 30 of 42
banks that had failed, 294 of 787 problem barks, and a general
sample of 600 of the banks in the United States.
Findings/Conclusions: Adverse economic conditicons contributed to
some bank failures, but generally embezzlement and poor
management ot loans were the causes. Problems were not corrected
because: (1) the regulatory agencies were reluctant to use their
lega' .athority to force the banks to change, (2) the agencies
did not consult with bank boards, (3) examinations were set up
on a time basis rather than a problem solving basis, and (4)
recommendations were not generally made as to how to solve
problems. Examiners have enforcemeat tools they say use, both
informal and formal: (1) informally request that banks make the
changes, (2) formal writteL agreements to ccnfirt :orrection
plans, (3) cease and desist orders, (4) removal of management,
(5) financial assistance, (6) cancellation of deposit insurance,
(7) cancellation of Federal Raserve membership, and (8)
revocation of charter. Federal Reserve Board surveillance of
bank holding companies is not adequate. Training of examiners is
not adequate. Major imnrovements of bank suFervision include
organizational changes, closer bank surveillance, self-dealing
and insider transaction monitoring, consumer protection law
enforcement, new examination procedures, closer contact with
bank boards, problem solving monitorin.g, more use of formal](ViewImageLocal?handle=hein.gao/gaobaabut0001&div=1&collection=&method=preview&ext=.png&size=3)