Regulators Step Up Action Against National Banks

Regulatory enforcement actions against national banks soared 35% last year, the second big annual increase in a row.

The surge reflected the impact of both the recession and tougher regulatory scrutiny.

The Office of the Comptroller of the Currency took 1,718 enforcement actions last year, up from 1,269 in 1991, according to figures obtained from the agency. In 1991, enforcement actions, which result from violations of laws or regulations, had jumped by 67%, from 760.

Some banks had multiple actions taken against them. All told, about 20% of the country’s 3,647 nationally chartered banks were rebuked in some fashion last year.

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The comptroller’s office played down the increase. The agency pointed out that most of the increase stemmed from a rise in “informal actions,” which include supervisory letters and other relatively mild warnings that spell out violations. Informal actions rose by 48.3%, to 1,250 from 843.

Formal enforcement actions, which are considered more serious, increased at a slower rate, 10%, to 468 last year.

But bankers seized on the figures as further evidence for the industry’s argument that overzealous examiners are making bankers less willing to lend. And they maintained that even informal enforcement measures can have a chilling effect.

“It’s intimidation,” said Ken Guenther, executive vice president at the Independent Bankers Assn. of America. “What they are saying is: ‘You’re on the first step of a downward escalator.’ This is the problem President Clinton should get at.”

Ed Yingling, executive director of government relations at the American Bankers Assn., said, “We do have a concern for bankers that even the threat of informal actions can be very scary to boards of directors and cause them to be super conservative.”

The two other major bank regulatory agencies--the Federal Deposit Insurance Corp. and the Federal Reserve Board--have not yet released complete 1992 data on enforcement actions. But preliminary figures indicate that total enforcement actions increased at those agencies as well.

“What we are trying to do is deal with the problems we encounter earlier,” said Fred Finke, deputy comptroller for special supervision.