By Tad Gage -- Although overall employment stats continue to lag, at least one sector is demonstrating robust growth: the market for FDIC regulators and staffers.
I can almost hear the collective groan from the banking community. But hold on – maybe this isn’t an entirely bad thing.
The FDIC has announced it will increase its total examination staff by about 25% in 2010, which includes a 31% increase in risk management staff, according to data provided by the agency to FinCri Advisor, which has become one of my favorite “insider” news sources for banking and regulatory issues. The publication notes that would equate to a 69% staff increase at the FDIC since 2007. Scarily, a lot of these hires are temporary.
I can’t imagine an inexperienced full time hire or temp would do much more than keep lock-step with whatever the bosses dictate. The OCC is also upping staff – about 3% in 2010.
No doubt, more regulators will mean more reviews, more hassles, more questions, and more time spent on compliance. An influx of auditors and examiners who are wet behind the ears will probably result in even less flexibility than in the past, and more adherence to strict interpretation of regulations than ever. By nature, no bureaucrat (especially a new hire) has the experience or incentive to interpret individual circumstances.
What could be the possible upside? Well, maybe a little more pain up-front might get the whole thing over that much faster; like ripping off a sticky bandage versus pulling it off slowly. It’s going to hurt either way, but one way is faster.
To-date, examiners (no matter how experienced they are) haven’t been all that flexible or forgiving, anyway. The days of negotiating with examiners ended in 2008. Many forcibly closed banks in 2009 were initially given 18 months instead of 12 months until the next exam because they were deemed by the regulators to be in good shape. Then, in swooped the regulators. Negotiation and forbearance really hasn’t happened since 2007.
A larger staff potentially means more exams, but reviews and any results or directives may at least go faster. Any directives from Capitol Hill (if, indeed, legislators can ever figure out something mutually beneficial for the banking industry and the public) may be implemented faster and more fairly. We can only hope the efforts of bankers to make the case for some clear and fair directives from Washington will be heeded.
And consider that more examiners (and increasingly fewer banks to regulate!) may mean more careful and thoughtful analysis. Let’s face it: the majority of banks that have failed had some pretty serious issues.
Setting aside the conflicting messages regarding lending and capital adequacy that confuse everyone, expanding the ranks of examiners will probably accelerate the demise of struggling banks and perhaps accelerate and facilitate the process for banks with the ability to survive.
I don’t know if throwing more regulators at the “problem” will result in a quicker cure. But we can nurse hope that adding examiners is a first step in getting all these issues behind us so bankers can get back to banking in a more predictable regulatory environment.
