Bank Examiners

When most people think of bank examiners, they envision the examiner from It's a Wonderful Life—a humorless bureaucrat who threatens to destroy George Bailey. In reality, bank examiners are public servants. They work to ensure that our nation's banks remain strong and safe. Essentially, they protect our money and our nation's economy.

A bank examiner's primary responsibilities are to ensure the safety and soundness of the bank he or she examines and to enforce the rules and regulations of the state or federal organization he or she represents. To accomplish this, bank examiners travel to different banks throughout the year. In most small- to medium-sized banks, they set up temporary offices. In larger banks, they may have permanent offices. The examination process can take anywhere from a few weeks to several months, depending on the size of the bank. A few extremely large banks are examined constantly throughout the year.

Bank examiners should not be confused with auditors or accountants. A bank examiner is as interested in a bank's operations as in the bank's financial records. Bank examiners conduct their examinations by reviewing a bank's policies to see, first of all, whether the policies are sound. They then review the bank's records to discover whether the bank is following its own policies. Bank examiners also observe the bank's day-to-day operations and interview managers and employees.

Bank examiners usually work in teams under one bank-examiner-in-charge. Each member or group within a team studies a different area of the bank's operations. One person or group might study the bank's lending policies and procedures. Another might study the bank's asset management. Still others examine the bank's information technology or estate management. Different regulatory agencies examine different types of banks and different areas of operation. The chief bank examiner is responsible for assembling the team for each bank. The composition of these teams varies depending on the nature of each bank's business. Because banking practices today are so complex, many regulatory organizations design their examination strategy around a bank's greatest areas of risk. This so-called "supervision by risk" enables regulatory organizations to examine banks more frequently and with greater efficiency.

Once a team of examiners has thoroughly reviewed different areas of a bank's operations, they analyze their findings, draw conclusions, and prepare a report. This report is forwarded to the regulatory agency for review. It is then returned to the bank's board of directors. These reports wield considerable power. A bank must act quickly to correct any problems identified in an examination. If a bank fails to do so, bank examiners have the authority to exact fines. In severe cases, a bank examiner can close banks or insist that they merge with other, more sound banks.

Because bank examiners must be able to exercise completely independent judgment about a bank's operations, their reports are strictly confidential. This confidentiality has been established to ensure that there is no interference with the regulatory process.