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22nd Conference of Examiners


December 3, 1965

Yours is a noble, albeit frequently misunderstood, occupation.
For many bankers, particularly

junior ones, the examiner is like Elbert

Hubbard's auditor.
I say "noble1 advisedly.

While the primary thrust of every

examination is pro bono publico, for the public good, it has a secondary
but very important private enterprise benefit.
to direct your attention for a few minutes.

It is to these I would like

The review of a b a n k ’ operation

and its balance sheet by a skilled examiner has many real benefits for
management and stockholders.

Detection of defalcations is an obvious one.

Less obvious, but more important perhaps, is the disclosure of potentially
dangerous trends in credits, asset mixes, and capital ratios.

In the main,

I believe these are appreciated by bankers, especially those with a lively
appreciation, born of experience, of how vulnerable a bank really is.


one banker who operates a small holding company observed to me, "I want the
examiners to turn over every piece of paper we have.

They are the best

assistants I have in policing the credit policies in our small shops."
Yet we have our critics.
The criticism originates in two ways.

The first of these is born

of an ignorance of the public objectives and private benefits to be derived
from an examination.

Only time and exposure cures this one.

to forestall this type of criticism.

The examiner can only grit his teeth,

try to smile sweetly, and do the best possible job.

We can do little

The other source we can control, for it originates wit h us.
are many points of potential friction that can become abrasive.


These are a

few of them:

Criticism for criticism's sake.

Our objective should be objective.

financial condition of the bank.
material and what is not.

Insurance examiner

We want to fairly set forth the

This means a qualitative appraisal of what is

Save your ammunition for the big game.

Do not look for the least creditable motive in analyzing

an action of bank management.

To use the hunting analogy again -- don't

make sound s h o t s ...... just because the bushes rustle, don't assume there is
an elk t h e r e ...... it may be your horse or your best friend.

In my former

career of serving the business community, I found there was no limit to the
variety of wrong decisions businessmen could make -- wi t h the best of motives.
The banker's decision likewise may have been a bad one -- unwise or perhaps
technically illegal ~~ but do not leap to the conclusion that the motives
were d i s c r e d i t a b l e .
We in regulatory agencies, either within a government structure
or one slightly to one side, have a service obligation which has been e m p h a ­
sized as recently as two weeks ago in a special request from the President
to the heads of the various agencies of the federal government.

In discharging

our public responsibilities, let us remember the service obligation.


means maintaining an objectivity towards our work -- a sense of proportion.
Banks exist only to serve the public.

They have no God given right to exist,

much less survive, if they fail in that service function.

By the same token,

we exist only to see that they remain financially sound, so they will continue

to provide the demanded service.

We exist to serve -- and we must never

forget it.
As part of our desire to expand our service to m e mber banks, with
the broader objective of strengthening the banking system in the Ninth
District, we are currently offering a functional cost analysis, about which
you will hear more shortly.
Next Friday, there will be a meeting here of representatives of the
State Bankers Associations, C.P.A. Associations, and the regulatory agencies
to explore mutual areas of interest.

Our objective is not to find new areas

of income for CPA's and expense for banks, but the impact of new hardware,
accounting language, and income taxes, on the average small bank have made
internal control and audit a necessity, rather than the luxury they have
been regarded.

Hopefully, we will be able to act together to outline

areas of discussion and interest for continuing dialogues in each state.

Now to functional cost .........