I have mentioned the OCC Failed Bank Study in the past. The best time to investigate this topic is when times are relatively good. This is an older study but all points are still valid. I mentioned a newer study monitoring CAMELS from 2025 a few months ago. Both studies have similar observations.
There are two major areas of the study. Items that improved monitoring and controls can avert a disaster and people/weak management areas. We can help the bank deal with the monitoring and controls. It would be a good idea to circulate the study to upper management and the board. Recognizing problems now could save millions down the road.
Here are the major monitoring and controls that should be researched and improved in most banks. These are quoted from the study:
Nonexistent or poorly followed loan policies. (81% of failures)
Inadequate systems to ensure compliance with internal policies or banking law. (69%)
Inadequate controls or supervision of key bank officers or departments. (63%)
Inadequate problem loan identification systems. (59%)
Nonexistent or poorly followed asset/liability management policies. (49%)
Excessive credit exceptions. (81%)
Overlending – high loan amount relative to debt service. (73%)
Collateral based lending and insufficient cash flow analysis. (55%)
Unwarranted concentrations of credit. (37%)
The study mentions banks that were initially problem banks, but they implemented improved controls/monitoring to the above factors. All banks in this group survived.
Our system LQAS attacks most if not all of the weaknesses above. During the great recession Our entire client base was rated four or five on bankrate.com.
Reviewing the entire study will help with non system changes to the banks operating procedures (management style). Check all of the boxes and your bank should thrive and continue with existing ownership for years to come.
Immediate Contact Chris Crawford President [email protected] 512-986-6093