Representatives from NAHB and the Independent Community Bankers Association (ICBA) met with FDIC Chairman Sheila Bair and her staff Monday to discuss the troubling exam environment facing community banks. They told Bair and other FDIC officials that the excessively tough exam environment is having a significant effect on the ability of community banks to lend and support economic growth. The association continues to hear that examiners are overzealous and unduly overreaching and are, in some cases, second guessing banks and professional independent appraisers.

In some cases, ICBA said, examiners are making community banks downgrade performing commercial real estate loans solely because the value of the collateral has gone down and are demanding write-downs and reclassifications of loans based on forced sales of real estate occuring during illiquid or dysfuctional markets. They recommended better communication between the Washington office and field examiners concerning exam policies and that the FDIC ombudsman process be improved so that bankers could feel more comfortable appealing decisions made by field examiners.

Source: ICBA