Assessing Risk, a Few Years Too Late

The Office of the Comptroller of the Currency this week announced an upcoming round of workshops for community bank directors in Charlottesville, Va. The workshops aim to “expand directors’ skills and understanding of issues facing their banks” and cover topics like risk assessment and credit risk, according to a media statement. It seems only natural that regulators like the OCC would host workshop events to address the troubles facing community banks. There may be no better time (except, perhaps, for four years ago before the height of the housing bubble) to educate community banks on risk assessment than when they seem to drop like flies every Friday with a new batch of bank failures. The workshops might proactively prevent bank failures by educating directors. They come at a time when weekly failures and costly one-time government-assisted takeovers of US banks continue to hit the Federal Deposit Insurance Corp.’s deposit insurance fund, which market players speculate is going broke. The workshops are limited to 50 registrants. They also cost $65 per attendant. Considering the unwinding mortgage crisis and the need to educate banks and prevent further losses to the FDIC, it seems like the ideal event for free admission would be the one that educates bankers on credit risk. But perhaps we underestimate the brilliance of the OCC’s plan. Perhaps the $65 registration and admission fee heralds a new wave of alternative funding for bank regulators. Should the FDIC, for example, host a series of five workshops on protecting consumer deposits and charge $65 for up to 50 registrants, it could raise an easy $16,250 in a weekend toward its insurance fund. Just a few years of that, and the FDIC might be able to pay for a single community bank failure.