A bank examiner is a financial professional who has the task of making sure that banks and

savings and loan associations A savings and loan association (S&L), or thrift institution, is a financial institution that specializes in accepting savings deposits and making mortgage and other loans. The terms "S&L" or "thrift" are mainly used in the United States; sim ...

are operating legally and safely, in accordance with the

bank regulation Bank regulation is a form of government regulation which subjects banks to certain requirements, restrictions and guidelines, designed to create market transparency between banking institutions and the individuals and corporations with whom th ...

s imposed on these institutions by the

charter A charter is the grant of authority or rights, stating that the granter formally recognizes the prerogative of the recipient to exercise the rights specified. It is implicit that the granter retains superiority (or sovereignty), and that the re ...

ing level of government. In the United States, they may conduct supervision on behalf of a U.S. government agency, the

Federal Reserve System The Federal Reserve System (often shortened to the Federal Reserve, or simply the Fed) is the central banking system of the United States of America. It was created on December 23, 1913, with the enactment of the Federal Reserve Act, after ...

, a state banking authority, or for the financial institutions themselves as

internal auditor An internal auditor is an auditor who is appointed by the Board of directors of the company in order to carry out the internal audit function. Generally an employee of the company acts as an internal auditor, whereas some companies appoint an exter ...

s. The main duties of a bank examiner are to ensure that a bank's operations are legal and can provide financial stability. A bank examiner will also review financial statements, evaluate the level of risk associated with loans, and assess the management of a bank.

History in the United States

The early periods of U.S. history were characterized by extremely loose banking regulations, which contributed to multiple banking crises and economic recessions. This is commonly known as the Free Banking Era, a time when the bank examination profession did not exist in the United States. Eventually, the role of bank examiners was formalized by the National Banking Act of 1864, which formally established the Office of the Comptroller of the Currency (OCC) as the supervisor of all banks, whether chartered by a state government as a state bank or by the federal government as a national bank. Banks began to report financial information on a quarterly basis, and bank examiners were hired to inspect institutions. Early examiners of this era faced grueling travel by railroad, stagecoach, or horseback in order to conduct their on-site examinations. While the creation of the OCC helped stabilize the banking system, the post-

American Civil War The American Civil War (April 12, 1861 – May 26, 1865; also known by Names of the American Civil War, other names) was a civil war in the United States. It was fought between the Union (American Civil War), Union ("the North") and t ...

economy continued to present challenges to financial stability. After the Banking Panic of 1907, the

Federal Reserve Act of 1913 The Federal Reserve Act was passed by the 63rd United States Congress and signed into law by President Woodrow Wilson on December 23, 1913. The law created the Federal Reserve System, the central banking system of the United States. The Panic ...

called for the creation of the

. In addition to its

central bank A central bank, reserve bank, or monetary authority is an institution that manages the currency and monetary policy of a country or monetary union, and oversees their commercial banking system. In contrast to a commercial bank, a centra ...

responsibilities, the Federal Reserve was also charged with supervising state-chartered banks that were members of the Federal Reserve System. Eventually, the effects of

Great Depression The Great Depression (19291939) was an economic shock that impacted most countries across the world. It was a period of economic depression that became evident after a major fall in stock prices in the United States. The economic contagio ...

also led to the enactment of the

Banking Act of 1933 The Banking Act of 1933 () was a statute enacted by the United States Congress that established the Federal Deposit Insurance Corporation (FDIC) and imposed various other banking reforms. The entire law is often referred to as the Glass–Stea ...

, which created the Federal Deposit Insurance Corporation (FDIC) as a deposit insurer and supervisor of state-chartered banks that were not members of the Federal Reserve System. State banking authorities shared oversight responsibilities with the Federal Reserve and FDIC over state-chartered banks, while the OCC alone maintained oversight of nationally chartered banks. The ranks of bank examiners grew significantly during this period, which is often called the Regulatory Era. Finally, due to the

Great Recession The Great Recession was a period of marked general decline, i.e. a recession, observed in national economies globally that occurred from late 2007 into 2009. The scale and timing of the recession varied from country to country (see map). At ...

and the

Dodd–Frank Wall Street Reform and Consumer Protection Act The Dodd–Frank Wall Street Reform and Consumer Protection Act, commonly referred to as Dodd–Frank, is a United States federal law that was enacted on July 21, 2010. The law overhauled financial regulation in the aftermath of the Great Rece ...

, the Consumer Financial Protection Bureau (CFPB) was established in 2011. Among its other responsibilities, it shares supervisory authority with the OCC, Federal Reserve, FDIC, and states for banks with over $10 billion in total assets.

Duties and functions

Bank examiners monitor and evaluate the financial condition of institutions and their compliance with relevant regulations and laws. They evaluate the quality of risk management practices, compliance with

consumer protection Consumer protection is the practice of safeguarding buyers of goods and services, and the public, against unfair practices in the marketplace. Consumer protection measures are often established by law. Such laws are intended to prevent business ...

and

financial crime Financial crime is crime committed against property, involving the unlawful conversion of the ownership of property (belonging to one person) to one's own personal use and benefit. Financial crimes may involve fraud ( cheque fraud, credit card fra ...

regulations, and management's ability to run the institution in a safe and sound manner. The bank examination process may include inspection of the facility and the bank's records, as well as fact-finding interviews with management. Bank examiners usually work on-site, traveling to various institutions and branches as scheduled or as requested, although some work may also be done through remote access. Frequency of examinations is determined by statute and the risk level of the institution. Complex banks may have teams of examiners stationed year-round in its offices to perform ongoing monitoring. The bank examiner is expected to be knowledgeable of

finance Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of production, distribution, and consumption of money, assets, goods and services (the discipline of f ...

and

accounting Accounting, also known as accountancy, is the measurement, processing, and communication of financial and non financial information about economic entities such as businesses and corporations. Accounting, which has been called the "languag ...

principles (particularly

forensic accounting Forensic accounting, forensic accountancy or financial forensics is the specialty practice area of accounting that investigates whether firms engage in financial reporting misconduct. Forensic accountants apply a range of skills and methods to de ...

), as well as the relevant banking procedures and protocols. In some cases, an examiner will have worked in bank

management Management (or managing) is the administration of an organization, whether it is a business, a nonprofit organization, or a government body. It is the art and science of managing resources of the business. Management includes the activitie ...

positions in the past. In the United States, it is a crime to obstruct a federal bank examination. Bank examiners report findings to their employing agency, and usually to the

board of directors A board of directors (commonly referred simply as the board) is an executive committee that jointly supervises the activities of an organization, which can be either a for-profit or a nonprofit organization such as a business, nonprofit orga ...

and

upper management Senior management, executive management, upper management, or a management is generally individuals at the highest level of management of an organization who have the day-to-day tasks of managing that organization—sometimes a company or a cor ...

of the examined institution. They are expected to provide analysis and evidence to substantiate their findings, in an objective and non-judgmental manner; and in particular to draw any serious violations of regulations to the appropriate levels of authority. Recommendations for corrective action can be made if warranted. Examiners, particularly those employed by a regulatory agency, may also assign supervisory ratings to institutions and place legal enforcement actions, civil money penalties, or other punishments for noncompliance.

Hiring and training

Aspiring bank examiners are usually required to have an

undergraduate degree An undergraduate degree (also called first degree or simply degree) is a colloquial term for an academic degree earned by a person who has completed undergraduate courses. In the United States, it is usually offered at an institution of higher e ...

economics Economics () is the social science that studies the production, distribution, and consumption of goods and services. Economics focuses on the behaviour and interactions of economic agents and how economies work. Microeconomics anal ...

, or related business field. In some cases, a background investigation may be performed on the candidate to assess their ability to protect sensitive information. Newly hired examiners must immediately comply with ethics rules that prohibit certain actions, such as holding bank

stock In finance, stock (also capital stock) consists of all the shares by which ownership of a corporation or company is divided.Longman Business English Dictionary: "stock - ''especially AmE'' one of the shares into which ownership of a compan ...

or receiving loans from specified financial institutions. While examiner training requirements vary depending on the employing agency, federal bank examiners in the United States are generally encouraged to complete rigorous training programs to become certified as commissioned examiners. This title indicates that the holder has a high level of general examination expertise and is empowered to serve in key roles such as examiner-in-charge. Examiner commissioning programs may demand several years of on-the-job training, formal classroom instruction, and knowledge tests on topics such as banking, accounting, and regulations. Once commissioned, bank examiners may have the opportunity to further develop specialties in large bank,

asset management Asset management is a systematic approach to the governance and realization of value from the things that a group or entity is responsible for, over their whole life cycles. It may apply both to tangible assets (physical objects such as buildings ...

IT security Computer security, cybersecurity (cyber security), or information technology security (IT security) is the protection of computer systems and networks from attack by malicious actors that may result in unauthorized information disclosure, th ...

anti-money laundering Money laundering is the process of concealing the origin of money, obtained from illicit activities such as drug trafficking, corruption, embezzlement or gambling, by converting it into a legitimate source. It is a crime in many jurisdictio ...

capital markets A capital market is a financial market in which long-term debt (over a year) or equity-backed securities are bought and sold, in contrast to a money market where short-term debt is bought and sold. Capital markets channel the wealth of savers ...

, and other areas. They may also advance to management positions in their respective field offices.

Notable incidents

Failure of First National Bank of Keystone - September 1, 1999
As bank examiners from the

Office of the Comptroller of the Currency The Office of the Comptroller of the Currency (OCC) is an independent bureau within the United States Department of the Treasury that was established by the National Currency Act of 1863 and serves to charter, regulate, and supervise all nat ...

began discovering fraud and risk management deficiencies at the First National Bank of Keystone in Keystone, West Virginia, bank officials began intimidating them by making verbal threats, taping conversations, forging emails from examiners, and hiring security guards to follow them around. The examiners requested, and received,

U.S. Marshal Service The United States Marshals Service (USMS) is a federal law enforcement agency in the United States. The USMS is a bureau within the U.S. Department of Justice, operating under the direction of the Attorney General, but serves as the enforceme ...

protection as they continued their work. The

examiners, and the

Federal Deposit Insurance Corporation The Federal Deposit Insurance Corporation (FDIC) is one of two agencies that supply deposit insurance to depositors in American depository institutions, the other being the National Credit Union Administration, which regulates and insures cr ...

examiners who later joined them, ultimately uncovered the fraud and declared the bank insolvent. It was eventually closed down, with the FDIC as receiver. Subsequently, several bank directors went to federal prison for charges such as obstructing a bank examination and fraud. It was discovered that some bank records were buried in the ranch of one of the directors.

References

{{reflist Accountancy occupations Auditing Banking Banking occupations

History in the United States

Duties and functions

Hiring and training

Notable incidents

See also

References