Banking division cuts staff, makes changes in exam frequency

Northwestern Financial Review, Nov 4, 2000 by Olmsted, Monte

Reorganization at the Iowa Division of Banking in Des Moines has led to the elimination of three staff positions, and a revision calling for more frequent examinations at troubled banks.

Holmes Foster, banking superintendent, said the changes were necessary to keep the state's top bank regulator level with the industry. "Banking has changed more in the last 10 years than in the previous 50. We need to be current," Foster said.

And that includes streamlining and creating a more efficient division of banking, which oversees Iowa's state-chartered banks.

Three top management positions - deputy superintendent and two assistant superintendents-- were eliminated effective Oct. 16. The move will save the state an estimated $284,000 in pay and benefits, Foster said.

The trio of employees affected were longtime veterans at the Iowa Division of Banking. Steven Moser, deputy superintendent, had been with the department for 24 years, while Mary Fehring and Jeff Jungman, assistant superintendents, had 20 and 16 years, respectively, Foster said.

"We simply had been too heavy at the office level, and these are positions that have been eliminated in the reorganization and will not be replaced," Foster said.

Duties of the three will be distributed among the rest of the staff, which consists of 15 people. Another staff change has Vaughn Noring being named bank bureau chief, a new supervisory position. A 14-year veteran of the Iowa Division of Banking, Noring most recently served as a bank examination analyst.

As part of the reorganization, the department also will conduct its examinations on a risk management basis, Foster said. In other words, banks that are well-managed, wellcapitalized and have no significant problems will have less frequent examinations.

"And those that have problems of varying degrees, which absorb much of our time, thinking and resources anyway, will be examined more frequently than we've been able to do at the present," he said.

Foster noted that since banks pay for their supervision, the change provides a fairer distribution of costs. "It means [banks] that have problems will pay their fair share and not be subsidized by those in good shape. It's putting the cost where the problem is," Foster said.

Related to this issue, the division of banking has proposed a rule change for an Iowa law requiring state-chartered banks be examined once every 24 months. Under the proposal, the requirement would be met through examinations conducted by the Federal Reserve or the FDIC. Foster said it makes sense for the state and federal agencies to coordinate the examinations.

"Nobody has been getting to the banks as regularly as they should, and following on the heels of each doesn't do anybody any good," Foster said.

A public hearing on the rule change has been scheduled for Nov. 7 in Des Moines.