Banking


  

Comptroller of the Currency John C. Dugan emphasized the importance of effective two-way communication between the OCC and the banks it supervises. He highlighted this as a regulatory shortcoming in the last major banking downturn of the late 1980s and early 1990s.

“We aim not to repeat that mistake,” Dugan said in a speech to the Exchequer Club in April. “Our regulatory expectations must be clearly articulated, consistently applied and effectively enforced.”

He encouraged bank management to openly engage bank examiners so regulators can understand the true nature of a bank’s problems “rather than assuming the worst.” He said banks need to resist the reluctance to charge off obviously troubled loans or flag them to regulators. “While this resistance to recognizing problems at the beginning of an economic downturn may be human nature, it’s not healthy, because denial is not a strategy.”

The full text of Dugan’s speech is available at www.occ.gov/ftp/release/2008-44a.pdf .

The Financial Stability Forum (FSF) presented G7 finance ministers and central banks a report with recommendations for improving the resilience of markets and financial institutions. The report on Enhancing Market and Institutional Resilience recommends: (1) strengthened prudential oversight of capital, liquidity and risk management; (2) enhancing transparency and valuation; (3) changes in the role and uses of credit ratings; (4) strengthening the authorities’ responsiveness to risks; and (5) robust arrangements for dealing with stress in the financial system.

The report is available at www.fsforum.org/publications/FSF_Report_to_G7_11_April.pdf

The FSF, a conglomeration of national financial authorities, international financial institutions and international regulatory and supervisory groups, was created in April 1999 to promote international financial stability through information exchange and international cooperation in financial supervision and surveillance.

 
 
 

 

 

 

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