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Bank Examinations Are Increasingly Focusing on Immaterial Issues Says TCH Association President

In a keynote address to the Exchequer Club of Washington, D.C, Greg Baer highlighted the recent breakdown in the bank supervision framework



Sean Oblack

Washington, DC – February 28, 2018 – Today, Greg Baer, President of The Clearing House Association, spoke to the Exchequer Club of Washington, D.C. where he discussed the current framework for bank supervision. 


“[P]ost-crisis, our examination system has lost its moorings.  It has extended well beyond its statutory remit, and focused increasingly on immaterial or unrelated issues,”  Mr. Baer stated in his remarks prepared for delivery.  “As a result, banks have not only incurred significant unnecessary costs, but …more importantly have frequently been blocked from efforts to branch, grow or reorganize to better serve their customers.” 


In setting up his remarks, Mr. Baer explained that supervision is not a term used in banking law, but rather, the law provides for banks to be examined for the purposes of identifying unsafe and unsound practices or violations of law. 


Mr. Baer concluded, “In sum, I believe that mission leap in examination scope, and a stronger link between examination findings and the ability of a bank to expand, have harmed, not helped, the examination process.  Traditionally, the examination process has included informal give-and-take, and examiner recommendations short of MRAs with ratings consequences.  Examiners bring useful perspective to bank processes, identifying problems that may not rise to the level of unsafe and unsound.  On the other hand, bank management should be able to consider that criticism, and explain why they have chosen to go another way.  In my view, weaponizing the examination process by magnifying its impact on bank powers, and shifting its focus to matters unrelated to safety and soundness, has seriously degraded this valuable interchange.”


Formed in 1960, The Exchequer Club is comprised of over 150 prominent senior professionals including federal regulators, lawyers, members of Congress, journalists and trade association leaders. The Club has established itself as a preeminent forum for frank discussions of economic, financial and political issues.


About The Clearing House.  The Clearing House is a banking association and payments company that is owned by the largest commercial banks and dates back to 1853.  The Clearing House Payments Company L.L.C. owns and operates core payments system infrastructure in the United States and is currently working to modernize that infrastructure with a new, ubiquitous, real-time payment system.  The Payments Company is the only private-sector ACH and wire operator in the United States, clearing and settling nearly $2 trillion in U.S. dollar payments each day, representing half of all commercial ACH and wire volume.  Its affiliate, The Clearing House Association L.L.C., is a nonpartisan organization that engages in research, analysis, advocacy and litigation focused on financial regulation that supports a safe, sound and competitive banking system. 


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