The Banker's Advocate - September 30, 2004 - Page 2

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Text Box: bank in a “virtual” environment. The management team makes decisions in a wide variety of areas, including pricing of and growth strategies for both assets and liabilities, capital support, reserve account funding, and matters such as salary and staffing levels. All of these issues are factored into each scenario. Each group has an opportunity to test its decisions in a non-competitive environment to determine what works and what doesn’t. The decisions made by other teams will affect the actual results as competitive factors are incorporated into the simulation. Points are awarded to each team for the ability to meet their stated goals and strategic objectives. The class began with a brief overview and we were separated into four teams. Each group represented a “new” management team that had been brought in by

Text Box: EDITOR’S NOTE: The author, Carey Sharp, is a Senior Examiner at the Bank Department. He has been at the Department since August 2000. “You are no longer examiners. You’re now bankers.” When the instructor told us that on the morning of the first day, I knew we were in trouble. How can you just take one hat off and put another one on? It’s not like flipping a switch. We all had been examiners for almost four years. It’s hard to change that mindset at a moment’s notice. In May of this year, I participated with Bank Department senior examiners Kevin Adams, Trey Clark, Tom Cook and Dana Kombrink, along with 14 other examiners from across the nation, in a BANKdynamics® seminar in Salt Lake City, Utah. The week-long event puts examiners in the shoes of the banker as they try to manage assets and liabilities while maintaining their chosen strategies and goals. As one examiner said at the end of the week, “Easier said than done!” The Conference of State Bank Supervisors (CSBS) has partnered with Olson Research Associates, Inc., to develop and offer a class on bank asset/liability management. BANKdynamics® is a bank simulation that is played in teams. Each team acts as senior management and runs the

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Text Box: the Board of Directors to operate an institution. We had been given a two-year management contract, so we had only a couple of years to showcase our ability to run a bank. Each team chose its own strategies and goals. Much like the “real” world, you didn’t know for sure what the other banks’ strategies and goals were going to be. Decisions were to be made at the beginning of each quarter. Therefore, eight sets of decisions would be made over the span of our two year contract. Initially, groups gathered to discuss the strategic plan for their institution. As you can imagine, there were varied opinions within each group as to what direction the bank should take. Do we grow the bank? If so, do we need to issue more stock to maintain adequate capital levels?

Text Box: degree of the problem and offer assistance in dealing with the problem. In most cases, the Department can prevent a bank from coming under corrective action. Another reason for the declining number of banks under an order is the excellent work done by the Bank Department after a bank comes under an order. The Department’s chief examiners and assistant chief examiners are in constant contact with banks that are under an order. This contact may come in the form of phone calls, visits to a bank’s board meetings or meetings with bank management. The purpose of this communication is to provide guidance relative to what is expected of management and to evaluate a bank’s progress along the way. In addition, a bank’s management and employees call the Department occasionally seeking guidance and direction. I would like to commend the chief examiners and assistant chief examiners for the excellent job they have done in assisting our banks under an order and those banks that have the potential of coming under an order. I think their hard work and dedication is one of the primary reasons for the declining number of problem banks. Of course, credit must be given to management at the banks that have come out from under orders. Their efforts to comply and improve are instrumental in the process.

Text Box: Seminar places examiners on banker’s side of desk