The Regulatory Mindset

Where the FDIC once gave broad latitude to the OCC, OTS and state chartering agencies, now everyone else is expected to take a back seat to the almighty insurer. In the eyes of some field examiners (FDIC and others), anything abnormal is bad. If your bank is funded from nontraditional sources or invested in nontraditional assets, the presumption is that you have taken on excessive risk. Don’t let examiners make sweeping assumptions and penalize you for the way your bank is structured. Choose which battles are worth fighting, then stand up and defend your position. If the worst case is a 2 or 3 rating in liquidity and a composite 1 or 2, consider swallowing your medicine with a smile. If the concern might result in a composite 3 rating (which will result in a regulatory order) that you feel is undeserved, fight to the last man. You should know your bank better than someone who comes in for two weeks every 18 months. A disagreement, handled professionally, is an opportunity to show just how well you know how your bank behaves.