Office of the Comptroller of the Currency
NR 2002-31
		FOR IMMEDIATE RELEASE			
		March 25, 2002

Contact:  Robert M. Garsson
(202) 874-5770

Comptroller Hawke Says Independence of Bank Regulators
Helped Industry Remain Strong to Support Economic Recovery

WASHINGTON -- Comptroller of the Currency John D. Hawke, Jr. said today 
that the banking industrys good health -- and its ability to support 
the economy as it emerges from economic difficulties -- owes in part 
to the independence of the bank regulatory agencies.

Because we have been able to provide not just quality supervision, 
but independent supervision, the U.S. banking system is strong today,
 Mr. Hawke said in a speech to the National Association of Business 
Economists.  

In the late 1980s and early 1990s, he said, the OCC was encouraged to 
overlook weaknesses in the balance sheets of some troubled institutions 
in the hope that the economy would improve and those banks would return 
to health on their own.

Some called this watchful waiting, Mr. Hawke said.  A better term was 
wishful thinking.  As it turned out, we did no one any favors -- certainly 
not the affected banks -- by allowing problems to go uncorrected.  
Losses mounted, forcing us finally to take precipitous action to deal with 
what were by now deeply troubled, if not insolvent, banks.

The Comptroller said U.S. regulators learned from the experience of the 
1980s and 1990s, adding that the industry and the economy have benefited 
as a result.

Although the evidence shows that U.S. banks have gradually been raising 
their lending standards  a positive development, in our opinion  business 
credit is still plentiful  much more plentiful than at any similar time 
since the early 1970s, he said.

Now that loan demand is poised to pick up again, banks will be in a condition 
to respond, and the economy will have the capital it needs in order to resume 
its upward growth, the Comptroller added.

Mr. Hawke said that much of the credit for the industrys good health goes to 
bankers themselves, who have diversified their product lines, built capital, 
reduced their reliance on volatile interest income, and invested in advanced 
risk-management techniques.

 The historically high levels of capital in the system today are a reflection 
of the experiences of a decade ago, when adequate capital -- by regulatory 
standards -- turned out in some cases to be wholly inadequate to cover the 
actual volume of loan losses, Mr. Hawke said. Some bankers vowed that this 
would never happen again.

The importance of maintaining the independence of bank regulatory agencies 
has also been highlighted in other countries as well, where banks were pressured 
to continue lending to uncreditworthy borrowers or required to direct money to 
specific industries favored by the government, Mr. Hawke added.

Nearly every crisis we examine, no matter where it occurred, provides a reminder 
of the dangers of politicizing the banking system and its supervision, Mr. Hawke said.

We make our greatest contribution to a sound economy by assuring that our banks have the 
capacity to extend credit when creditworthy loan opportunities are presented, he added. 

# # #

The OCC charters, regulates and examines approximately 2,200 national banks and 52 
federal branches of foreign banks in the U.S., accounting for more than 54 percent 
of the nations banking assets. Its mission is to ensure a safe and sound 
and competitive national banking system that supports the citizens, communities 
and economy of the United States.

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