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Financial Services Advisory - CEOs See Examiners Expanding Their Focus Beyond Real Estate

Monday, January 23, 2012 - Frank Gonzalez, CPA / CFF

Frank Gonzalez

Banks can expect that examiners from national and state regulatory agencies will put a major focus on operational risk, as well as on asset quality, during their next regularly scheduled examinations, according to the participants in a CEO Panel on January 18.

Panelists at the South Florida Banking Institute event in Miami were: Simon Cruz, President of Intercredit Bank; Guillermo Diaz-Rousselot, President and COO of Continental National Bank of Miami; Jorge Gonzalez, President and CEO of City National Bank; and Raul G. Valdes-Fauli, President and CEO of Professional Bank.

They provided general observations based on recent examinations of their banks and on information they have heard from other bankers.

Here are some details of what they are seeing in examinations and in other trends in banking:

  • Reviews of real estate loan portfolios and of allowances for loan losses remain the biggest focus in most examinations. Compared with most recent examinations, some examiners are "drilling down" and reviewing more loans.
  • Examiners can be expected to put added focus on reviews of operations - including management, as well as information technology and compliance.
  • Amid historic low interest rates and questions about whether that will continue, examiners are looking closely at banks' interest rate sensitivity. Banks will need to be sure that they can validate their models for withstanding changes in interest rate environments.
  • Bankers are expecting that growth in profits and loans will remain relatively low for at least several years. An important task is to make sure that directors and shareholders understand why returns will not be as high as in years prior to the recession.

If you would like additional information on the recent CEO panel or on regulatory issues that are impacting banks, do not hesitate to contact our Financial Institutions specialists or call us at 1-800-239-1474.