Summary

GAO evaluated changes made in the supervision of banks since the 1976 study by its Task Force on Federal Supervision of Banks.

Federal bank regulatory agencies have improved bank safety supervision. They have used new laws, procedures, and systems to gather data more efficiently, identify bank problems, and effect solutions to those problems. However, Congress and the regulatory agencies need to reevaluate these laws and procedures to alleviate unnecessary reporting by banks and to make the supervisory process more efficient and effective. Although GAO has studied different aspects of bank supervision, it has not comprehensively determined the overall effect of these changes. The regulatory agencies now use computerized monitoring systems to analyze data regularly reported by banks. Thus, bank problems usually are identified well before they reach a critical stage, and the agencies are paying more attention to bank management practices that cause financial problems. However, their tendency to equate quality of management to a bank's financial condition could be misleading. Regulators, using more structured guidelines, are taking more formal actions against banks with problems. Over half of the bank examinations conducted are modified examinations due to resource limitations. Thus, the agencies should train their staffs to use the modified procedures. A report required to be filed by banks on loans to executive officers and shareholders may be unduly burdensome on banks. Informal efforts taken by regulators to persuade banks to solve management weaknesses could be more effective if they were more specific. A cost benefit analysis should be made of the regulators' computerized surveillance systems.