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GCN Home > 10/09/06 issue

Take it to the bank

GCN Agency Award | Federal regulators put massive new financial reporting system to work

By Wilson P. Dizard III, GCN Staff

When Renaissance-era merchants developed modern banking networks in the 1500s, many of their customers believed that the banks simply kept all the gold in a secure vault. The Medici family and other bankers didn’t highlight the fact that they loaned out most of the gold to other merchants, to the nobility and to monarchs.

Just like today, those early bankers kept enough gold—cash—on hand to meet the withdrawals they expected. But when confidence in their ability to pay wavered, the Medicis couldn’t immediately call in their long-term loans, and their banks failed.

Banking today has improved—but, like the value of the currency itself, it relies largely on the trust of the public.

Banks not only have a “lender of last resort,” in the form of the Federal Reserve System, to back them up, but depositors benefit from insurance provided via the Federal Deposit Insurance Corp.

Health insurance

The Office of the Comptroller of the Currency is another regulatory agency that, like the Fed and FDIC, ensures banks’ financial health through regular oversight.

The three agencies work together through the Federal Financial Institutions Examination Council to harmonize their oversight methods.

Late last year, the federal bank regulatory agencies launched the first large-scale instance in the country, and the largest worldwide, of a cross-industry standard for representing and reporting financial data.

The agencies are using extensible business reporting language, or XBRL, to speed access to information about banks’ financial health and help eliminate errors in data.

The oversight agencies collect financial data on some 8,000 banks across the country. Some very large banks with balance sheets running to a trillion dollars have permanent cadres of bank regulators on site.

Smaller banks, with deposits in the $10 million to $20 million range, submit simpler reports to the regulators.

The data is intended to ensure that banks maintain adequate capital and that they control their ratios of nonperforming loans.

All this regulatory oversight is aimed at maintaining confidence in the banking system while assuring compliance with consumer protection and bank integrity requirements.

Martin D. Henning, associate director of FDIC’s Statistics Branch in the Division of Insurance and Research, worked as project director on the Call Report Modernization Project.

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