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DOCUMENT RFSUME
00277 - [A0751125]
Highlights of a Study cf Federal Supervision of State and
National Banks (Vol. IJo OCG-77-1a; b-11,831; 1-118535;
B-168904. January 31, 1977. 56 pp. + appendices (102 pp.).
Report to the Congress; by Elmer B. Staats, Comptroller General.
Issue Area: Internal Auditing Systems (200); Federal Regulatory
Activities (3000) .
Contact: Office of the Comptroller General.
Budget Function: General Government: Central Fiscal Operations
(8C3).
Organization Concerned: Federal Deposit Insurance Corp.; Federal
Reserve System; Office of thti Comptroller of the Currency.
Congressional Relevance: House Committee on Banking, Currency
and Housing; Senate Committee on Banking, Housing and Urban
Affairs; Congress.
Authority: National Banking Act. Edge Act. Financial
Institutions Supervisory Act of 1966. Federal Reserve Act of
1913. Banking Act of 1933.
Several congressional committees requested the
evaluation of the effectiveness of the superviscry efforts of
the three Federal agencies involved in monitoring banking
operations, because of the increasing instability of banks. The
study cbjectives were to evaluate the agencies' efforts to (1)
identify unsound conditions and violations of laws in banks, and
(2) cause bank management to take corrective actions.
Examiriation reports and correspondence files on more than 900
banks supervised by FDIC, Office of the Comptroller of the
Currency, and the Federal Reserve Boards were examined,
inclading 30 of 42 banks that had failed, 294 of ?87 problem
banks, and a general sample of 600 of the banks in the United
States. Findings/Conclusious: Adverse economic conditions
contributed to some bank failures, but generally embezzlement
and pocr management :f loans were the cause. Prctlems were not
corrected because: (1) the regulatory agencies wcre reluctant to
use their legal authority to force the banks to change, (2) the
agencies did not consult with bank boards, (3) examinations wire
set up on a time basis rather than a prcblem solving basis, and
(4) recomm-ndations were not generally made as to how to solve
problems. Examiners have enforcement tools they may use, both
intormal and formal: (1) informally request hat banks make the
chanqes, (2) formal written agreements to ccnfirm correction
plans, (3) cease and desist orders, (4) removal cf management,
(5) financial assistance, (6) cancellation of deposit insurance,
(7) cancellation of Federal Reserve membership, and (8;
revocation oL charter. Federal Reserve Board surveillance of
bank holding companies is not adequate. training of examiners is
not ad:quate. Major improvements of bank supervision include
otganizational chenqes, closer bank surveillance, self-dealing
and insider transaction monitoring, consumer protection law](ViewImageLocal?handle=hein.gao/gaobaabus0001&div=1&collection=&method=preview&ext=.png&size=3)