Federal Supervision of State and National Banks by the Comptroller of the Currency, the Federal Reserve System, and the Federal Deposit Insurance Corporation

The General Accounting Office conducted a study to determine the effectiveness of the Office of the Comptroller of the Currency, the Federal Reserve System, and the Federal Deposit Insurance Corporation in carrying out their bank supervisory responsibilities. The primary aims of the study were to ascertain (1) whether bank examinations are of sufficient scope to identify banks that are likely to have serious difficulties; and (2) whether supervisory agencies can and do follow through on their findings of problems in banks to see that corrective actions are taken by the banks. The study showed that agency examiners readily identified the poor practices that eventually led to the bank failures well before the banks closed. It is felt that supervision of banks would be improved if: (1) agencies discussed their findings with the banks' boards of directors; (2) agencies were given statutory authority to remove dishonest or grossly negligent bank officials and to assess civil penalties against banks and/or officers for specific violations; (3) agencies developed uniform criteria for identifying problem banks and the underlying causes of the problems; and (4) agencies treated banks in similar circumstances uniformly. A questionnaire sent to 1600 commercial banks showed a generally favorable opinion of Federal bank examiners.