More District Banks Are Choosing the Fed as Their Regulator

Julie L. Stackhouse

In the Eighth District, we are pleased to see a growing number of state-chartered banks choose the Federal Reserve as their federal banking regulator. At the end of 2004, the St. Louis Fed supervised 80 state banks. The number of state banks supervised will approach 100 by the end of this year.

From time to time, I am asked why more District banks are choosing the St. Louis Fed as their regulator. While I often note the experience of my staff, including my confidence in their ability to exercise good judgment in drawing fair and reasonable conclusions, I recognize that the views of the banks we supervise can be the most important barometer of our effectiveness.

So how do we seek the input of our banking constituents? Perhaps the most important thing we do is ask our state member banks for feedback. Following each examination, we conduct a survey to gain the banker's view of the quality of the examination process. Whether a safety and soundness or consumer compliance examination, bankers are asked to rate or comment on the examination team's performance in 12 areas, including the knowledge and professionalism of the staff and the consistency of exit meeting comments with the final report. The bankers' responses are submitted to an independent source to foster candor. This feedback is then used to help us continually improve our examination process.

We also hold meetings at each of our offices during the year to hear what is on the minds of bankers. This includes meetings at our satellite supervision office in Memphis. District bankers are generally complimentary of our "firm but fair" approach. To quote Tennessee banker McCall Wilson, "They (the Fed) tell me what I need to correct while offering guidance geared toward making mine a better bank. I don't want an easy exam. I'd rather have an exam that's thorough but reasonable. And they really do understand the business of banking."

We also listen to state bank commissioners in the District, whom we view as business partners. In Arkansas, a state where we've seen a number of banks convert to Fed membership, the bank commissioner tells us that state Fed-member banks like knowing that they can get quick answers to questions. He characterizes our staff as "professional," "stable" and "competent."

The business of banking supervision is not a customer service business in the traditional sense: We must ensure the safety of the federal deposit insurance fund and compliance with consumer protection laws and regulations. That being said, the business of banking supervision can be a business of mutual benefit for both the banker and the deposit insurance fund.

At the St. Louis Fed, we are committed to the results of constituent feedback. And we are also pleased to see a growing number of District banks join the Fed as members!

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