FOR IMMEDIATE RELEASE			
Contact:  Kevin Mukri
June 20, 2000 				    
(202) 874-5770

		Remarks by              
	      John D. Hawke, Jr.
	    Comptroller of the Currency 
		Before the
	   Stonier Graduate School of Banking 
		Washington, D.C. 
	   	 June 19, 2000

	Its a pleasure to welcome the first incoming class of the 
Stonier Graduate School at its new home here at Georgetown.  This 
is the third campus to house Stonier since it was founded back in 
1935 on the Rutgers University campus, and Im proud to say that 
the Office of the Comptroller of the Currency was present at the 
creation -- and ever since.  Over the years, dozens of our most 
able employees have come to Stonier both as students and faculty, 
and they have invariably been enriched by the experience.  The 
OCC is committed to building on this historic relationship and 
supporting the Schools important work in the years ahead.
	As you probably know, the school is named after its founder, 
Dr. Harold Stonier, perhaps the most distinguished educator of 
his day in the fields of business and finance.  It was Dr. 
Stonier who established the business school at his alma mater, 
the University of Southern California, during the 1920s.  But the 
good doctor grew increasingly weary of academe.  No ivory tower 
intellectual, he believed that for education to have real value, 
it had to be practical, and there was apparently too much 
abstraction -- and not enough application -- for Stoniers taste 
on the USC campus back in the twenties.  
	So he left to become education director of the American 
Institute of Banking in 1927, and then, a decade later, executive 
director of the American Bankers Association.  That happy 
marriage lasted twenty years.  And perhaps the highlight of his 
tenure at ABA was the creation of the graduate school of banking 
that today bears his name. 
	The school was founded on the proposition that if bankers 
were to enjoy the same status as other professionals, they needed 
specialized formal training.  The goal was not only to deepen 
their mastery of banking fundamentals, but also to encourage the 
exchange of ideas with other practitioners on the pressing issues 
of the day -- and not just the purely vocational ones.  
	Creative thinking was in short supply in the banking 
business during the 1930s.  Demoralized by the Great Depression 
and extensive new regulatory restrictions, many bankers had a 
hard time rousing themselves to come to work each day -- and an 
even harder time believing in themselves and in the importance of 
what they were doing for a living.  It might have been the least 
opportune moment to launch a graduate school of banking.  But 
never was one more needed to promote the intellectual stimulation 
and fraternal pride then so sorely missing from most bankers 
lives.  
	So Stonier forged ahead, and the ABA, with its long record 
of support for professional education, backed him all the way.  
He saw the graduate school as an agent of change that would 
eventually lead to better days.  And he was right.  In the 
classroom and in after-hours skull sessions, plans began to take 
shape to revive the industry, nurture its creative spirit, and 
free it from excessive dependence on government.  Many of the 
leaders who were responsible for restoring the industry to its 
position of influence and prestige in subsequent decades drew 
ideas and inspiration from their experiences as Stonier students.  
	The schools general goals today are much the same as they 
were during those early crisis years.  The current curriculum 
reflects the same strong emphasis on sound basic banking practice 
that was there at its inception.  Courses in credit risk 
management, asset/liability management, and regulatory compliance 
were essential parts of the core curriculum half a century ago, 
as they  are today.  But, faithful to Dr. Stoniers passion for 
perspective and innovation and for pushing the boundaries, the 
curriculum has not only kept up with the rapid changes that have 
occurred in financial practice in recent years, but has moved to 
the cutting edge of new financial products and services, new 
customer demands, and new technologies.  Among the courses from 
which youll choose are offerings in derivatives, international 
trade finance, and retail delivery of insurance services.  It 
should be next to impossible to walk out the door with a Stonier 
diploma and not have an advanced understanding of the challenges 
and opportunities that await the banking industry as it moves 
into the 21st century.  
	But I believe that the underlying philosophy of the Stonier 
curriculum -- this balanced blending of old and new, of vision 
and verity -- is every bit as important as any specific element 
of it to the future of this industry.  And thats what Id like 
to discuss with you this evening.
	The recent history of the banking business can be seen as an 
ongoing search for balance and stability.  Im not referring to 
the rigid, low-growth, cartel-like stability of a generation ago.  
Those days are gone -- and not lamented.  Rather, Im speaking 
here about the industrys quest for a middle ground between boom 
and bust -- for a way of avoiding alternating and often 
disastrous excesses of caution and risk.  It hasnt been easy, 
partly because bankers today probably have less control over the 
larger economic forces that affect them than at any time in the 
past.  It used to be that commercial bankers served as prudential 
counterweight, responsible for increasing credit during slack 
times and putting on the brakes when the economy threatens to 
overheat.  As you know, central bankers and governments now 
perform that critical function.
	It was not that long ago when bankers were responsible for 
setting standards and writing many of the rules that the rest of 
the business community lived by.  They dont do much of that 
anymore.  Competition and the diffusion of financial power have 
eroded the industrys dominance -- and its moral authority.  But 
bankers still play a critical role in the economy, and they still 
have compelling responsibilities to their customers and 
shareholders.  Bankers may not be as free as they once were to 
impose their standards on others, but they cannot afford to stop 
applying those standards to themselves -- even if that involves 
walking away from dubious deals, or steering clear of activities 
that may pose undue reputation risk, or entering new fields 
without first acquiring the necessary managerial expertise.  
	Self-denial takes discipline, and discipline takes 
reinforcement.  It requires concerted effort -- by attitude-
shapers in the financial media, by those who provide professional 
education, and by senior management -- to ensure that the 
industry keeps a close watch on the fundamentals of safe and 
sound banking while it is also looking --and thinking -- ahead. 
	We regulators have an important role to play in this effort.  
I would be less than honest if I didnt acknowledge that at times 
in the past we have been have been part of the problem.  We, too, 
have occasionally been guilty of the sin of inconstancy -- of 
blinking at unpleasant facts, of allowing problems to linger a 
bit too long, and then, necessarily, of acting abruptly against 
troubled institutions.  
	We would like to think that those days are behind us -- that 
we have learned from our mistakes and have taken the steps 
required to correct them.  We have resolved to bite the bullet 
when necessary -- and to compel banks to do likewise -- in 
addressing issues that we believe threaten the safety and 
soundness of individual institutions and the banking system as a 
whole.  When we spot weaknesses in credit underwriting, internal 
controls, compliance management, or any other critical phase of a 
banks operations, we are demanding prompt remedial action.  We 
are drilling into bank portfolios and downgrading assets where 
appropriate.  But we are also working with banks to achieve 
positive outcomes.  
	Were strengthening our early warning systems, coupling the 
power of modern technology with the formidable expertise of our 
staff.  Were making use of the stature of the Comptrollers 
office to remind bankers, publicly and behind the scenes, not to 
allow enthusiasm and short term considerations to override sound 
banking fundamentals and good common sense.  And were carefully 
monitoring industry trends -- again, drawing on sophisticated 
computer models and other technological innovations -- so that we 
can spot negative developments as well as provide positive 
reinforcement when the industry takes constructive steps to 
correct present or potential shortcomings.
	In other words, we are determined to respond to problems in 
graduated, timely, and tempered ways, so that we can avoid the 
need for more drastic action later on. 
We are encouraged to see the industrys leaders proceeding 
down a parallel track.  Many bankers are harnessing innovation, 
especially in technology, to the fundamentals of safe, sound, and 
balanced banking. 
	Tremendous breakthroughs have been achieved in the area of 
risk identification and management.  Bankers no longer have to 
rely on instinct and guesswork to figure out the nature and 
extent of the risk they confront.  Risk management has evolved 
into a specialized science, with tools and terminology all its 
own.  Computer models can detect small changes in customers risk 
profiles, collateral values, asset-liability matches, portfolio 
shifts, and lots more.  With this information, bankers are able 
to make incremental operational adjustments to meet corporate 
goals for risk tolerance in pricing, credit availability, 
portfolio allocation, and so forth.  Indeed, in recent months the 
industry has demonstrated an impressive dexterity in adjusting 
loan underwriting standards to reflect changes in the economic 
environment and their customers prospects.  By tightening the 
strings ever so slightly today, bankers are ensuring that the 
pain of massive credit curtailment can be avoided in the future. 
	The new risk management tools represent an important 
contribution to a safe and sound banking system.  But they are no 
panacea.  Such advanced tools and techniques are a complement to 
-- and must never become a substitute for -- a risk management 
program solidly grounded in an understanding of the nature of 
risk, the forms its takes, and how to control it.  Thats what I 
mean by a balanced blend of vision and verity. 
	Let me put it another way, in another context.  Because 
banking is such an information-intensive business, bankers -- 
contrary to their reputation for conservatism and aversion to 
change -- have always been among the earliest adopters of 
information technology.  Its not surprising that the first 
industry to extensively embrace computers, back in the 1950s, 
should also be a pioneer in the delivery of its products and 
services over ATMs, telephone lines, and the Internet.  
	But especially in dealing with technology, its crucial not 
to lose sight of the distinction between means and ends.  Banking 
is a service business.  And innovation, no matter how original, 
adds value to a financial institution only to the extent that it 
aids in the effort to provide excellent service.  No matter what 
niche in the marketplace a bank seeks to fill, customer service 
has to come first.  Everything else ranks a distant second. 
	Last years controversy over proposed federal anti-money 
laundering regulations had at least one unfortunate side effect: 
it turned an imperative into an epithet.  In fact, its every 
bankers responsibility -- perhaps their foremost responsibility 
-- to get to know their customers: their strengths and 
limitations, their goals and aspirations.  That understanding is 
the foundation of outstanding service and lifelong customer 
relationships.  Good bankers know what kinds of products and 
services to offer customers -- and, sometimes just as important, 
what not to offer them. No one benefits in the long run from a 
loan that cant be repaid or an investment that doesnt meet the 
customers needs.  
	Determining just what those needs are is a job that can best 
be accomplished, again, by drawing upon both traditional and 
modern techniques.  Certainly there is no substitute for the kind 
of person-to-person interaction that defined banking 
relationships in the old days.  Personal service is what many 
customers are looking for in a bank, and theyll go -- and stay -
- where they get it.  Most customers appreciate being known by 
their first names and having a single point of contact to which 
they can turn to get answers to their questions or to resolve a 
problem. 
	But modern information systems also give bankers 
unprecedented power to collect, sort,  analyze, and apply data 
about existing -- and potential -- customers.  Used properly, 
this information can be a boon to banks and consumers alike.  It 
gives bankers insight into the characteristics of their 
customers, information that enables bankers to customize their 
service offerings to each customers individual needs.  These 
days, its almost impossible to be a good financial services 
provider without continuing to invest in technology and up-to-
date automated systems, because thats what todays customers 
have come to expect: easy access to their funds and to account 
information, a wide variety of financial options, and enough 
information to make rational choices from among them.  
	But if personal financial information is misused or abused -- 
and its eminently susceptible to both -- it can be profoundly 
disruptive to customer relationships and a banks reputation. 
	The Know Your Customer controversy and the ongoing debate 
over the privacy provisions of the Gramm-Leach-Bliley Act showed 
how strong public sensitivities are on this subject.  Clearly, 
consumers expect their personal information to be handled in a 
way that does not compromise its confidentiality.  They do want 
to determine for themselves whether information about them is to 
be shared with affiliates of the bank or outside firms.  They 
expect transactions to be processed neutrally and nonjudgmentally 
by their banks.  They do not expect their banks to serve as 
agents of government surveillance.  And they have expressed these 
feelings in unambiguous terms to lawmakers and regulators all 
across the country. 
	But we have to be careful not to draw the wrong conclusions 
from the privacy controversy.  I do not believe that customers 
are registering any general opposition to the electronic delivery 
of financial services.  They expect effective safeguards against 
the misuse of personal information, but they dont expect bankers 
to return to the stubby pencil days.  To the contrary, as Ive 
already suggested, banking technology has been embraced by the 
general public with considerable enthusiasm.  Internet banking 
has been somewhat slower to get off the ground, but I detect 
little resistance to the idea per se.  Most people seem to have 
an open mind about on-line banking, but regard it as a work in 
progress, with a number of practical issues that remain to be 
ironed out.  Once these problems are resolved, I believe the 
future of limited Internet banking is bright -- although it will 
never entirely supplant person-to-person, brick-and-mortar 
banking.  Here, too, a balanced approach to the delivery of 
financial services, combining traditional and novel approaches, 
will almost certainly prevail.  A high level of customer service 
requires an advanced technological base.  But it also requires 
the personal touch.  Thats true today, and I believe it will be 
just as true in the future.  
	What consumers are demanding in regard to privacy, instead, 
is simply that bankers continue to live by what has long been a 
fundamental tenet of their business: that the information that 
consumers entrust to bankers will be held in confidence.  This 
expectation is a foundation stone of the banking business, and no 
one has a stronger interest than bankers themselves to assure 
that customers expectations of confidentiality are realized.  
	Although the differences between banking and other forms of 
economic enterprises have narrowed, banking still retains unique 
characteristics of a public trust.  Balancing public and private 
responsibilities has always been this industrys special charge.  
It still is today. 

The program youre about to begin offers the tools you need to meet 
those responsibilities.  As I said at the outset, Dr. Stoniers whole 
career as an educator and industry leader was built around the idea 
that it was what one did with ones learning that counted.  If you 
embrace the spirit as well as the substance of what the program offers 
and apply what youve learned to the critical decisions that you -- 
and the industry -- face, then Im confident that Stoniers legacy -- 
and the future of this profession -- are secure

The OCC charters, regulates and examines approximately 2,400 
national banks and 58 federal branches of foreign banks in the 
U.S., accounting for more than 57 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.