Fed Boosts Bank-Supervision Hiring

 

By Michael S. Derby for Bloomberg, July 9 2009

 

The Federal Reserve has boosted hiring in its banking supervision arm modestly over the last year, after a long period of stability in staffing levels.

That trend is likely to continue as the institution responds to changes in the banking sector and its oversight brought on by the biggest financial crisis since the Great Depression.

That hiring has not increased more given the extent of the last two years’ difficulties reflects how the central bank allocates its manpower, coupled with the long lead time needed to train a bank examiner.

According to data from the Fed, its overall headcount of personnel in the supervision and regulation group has risen from 2,674 last year to a budgeted headcount of 2,876 in 2009.

The increase in the number of workers who deal with overseeing banks comes as the Fed’s overall staffing levels have declined. Overall cutbacks are largely due to reductions in operations dealing with payment systems.

Banking and supervision staff are stationed in the central bank’s regional Federal Reserve banks. Not surprisingly, then, the greatest increase has been at the Federal Reserve Bank of New York, which oversees the institutions that make up the heart of U.S. financial activity. There, bank supervision and regulation staff rose from 575 last year to a projected level of 674 this year.

The Federal Reserve Bank of Richmond, another Fed regional arm overseeing top-tier banks like Bank of America, also saw an increase, to 281 supervisors, from 265 in 2008.

Other regional Fed arms saw small levels of growth. The San Francisco Fed, which watches over a major swath of the U.S. West, saw its banking and supervision staffing rise from 243 in 2008 to 252 this year. The Chicago Fed went from 339 to 368 in 2009.

The nearly 3,000 banking and supervision staffers are charged with overseeing just over 5,000 bank holding companies.

Gains in banking and supervision staff come as the nation’s political leaders are mulling a major overhaul of the financial regulatory system. The uncertain path of reform means it’s not entirely clear what the Fed will look like in the future.

As it now stands, the Fed appears likely to continue with its hiring of bank supervisors over the next couple of years. It’s possible if the Fed becomes what many expect, a regulator of overall financial stability, staffing could grow markedly to deal with increased bank oversight responsibilities.

Thus far, much of the recent and planned hiring has reflected changes in the nature of the banking system, as some major investment banks have converted to more heavily regulated bank holding companies, for example.

Moreover, staffing level numbers can be deceptive. The Fed has the ability to shift around underutilized bank examiners at regional Fed banks, placing them where they are needed most.

The Fed can also draw on contract workers who once worked as banking examiners to bolster its capacity.

What appears to be a modest rate of hiring given what’s happened in the financial system can also send false signals. That’s because the long training time needed to create a qualified bank examiner means the Fed simply can’t ramp up on a moment’s notice when a crisis begins.

 

Comments

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I am a former examiner and know of several other former examiners that have inquired at the US Treasury, the FRB and its regional affiliates, the FDIC, the OCC and FHFA in a genuine expression of interest to return to public service in this time of need. Time and time again, it has been my experience (and that shared by too numerous former regulatory colleagues) that even after repeated inquiries and applications for contract or full time employment, these organizations are more inclined to promote and reward the very same parties who were sleeping at the wheel or bring in less experienced industry hires who are not threatening to those currently in place. Repeated attempts to re-engage with these organizations have largely failed. The excuse that they are likely overwhelmed with applications and cannot deal with the number proves their organizational incompetence in not only their human capital management programs but more so within their current leadership teams, structures and cultures. The bank regulatory world is relatively small; its a horrible shame that those who have moved from that space and are willing to return in this time of need are largely being ignored.