NR 99-16
FOR IMMEDIATE RELEASE                                  
Contact:   Robert M. Garsson  202-874-5770
March 1, 1999                                                             


     
Comptroller Says Effective Supervision Needed to Manage International Crises

WASHINGTON -- Comptroller of the Currency John D. Hawke, Jr. said today that recent
financial dislocations have demonstrated the importance of effective supervision and that
regulators should work to promote the adoption of fundamental supevisory principles in parts of
the world where they have not already been accepted.

"No one has more to gain from effective supervision than the financial institutions that operate
under its umbrella," Mr. Hawke said in a speech to the Institute of International Bankers.
"Conversely, no one has more to lose when financial supervision goes awry, as events in East
Asia demonstrated."

The Comptroller said that supervisory errors were at least partly to blame for the financial
difficulties from which many East Asian economies are still struggling to recover. 

"It seems clear that a more robust, independent, and pro-active supervisory presence in those
countries would have mitigated, if not averted, some of their problems," he said.  "Just as clearly,
supervisory vigilance beyond the afflicted countries has played an important role in keeping the
Asian contagion from spreading beyond the Pacific Rim to other shores."  

Mr. Hawke said it is important to remember that despite losses attributable to Asian problems,
the overall safety and soundness of the U.S. banking system -- and every other major banking
system outside of Asia -- has not been compromised.

The Comptroller said the system has been helped by globalization and diversification.

"With their loans and investments so widely dispersed over product and place, and the growing
importance of fee income generated by new products and services, commercial banks in this
country seem more resilient and more resistant to sectoral downturns than at virtually any time in
their history," he said.

In addition, many banks have taken a portfolio approach to managing risk, offsetting riskier loans
and investments with higher quality ones in line with the institution's appetite for risk.  And 
banks have adopted advanced systems to measure, monitor and price risk.

While bankers deserve most of the credit for their apparent success in weathering international
storms, Mr. Hawke said bank supervisors have also played a role.

"Supervision today is certainly more sophisticated and -- shall I say -- more worldly than it was
three decades ago," he added. "Supervision across borders -- and across functions -- requires
collaboration with other  supervisors who may not share the same legal mandate or operational
philosophy or even speak the same language."

The Comptroller said an abundance of liquidity in the marketplace has increased the competition
for loans and prompted some bankers to take foolish risks.  Experience teaches that economic
conditions will eventually change and that compromises and concessions made during good
times have a likelihood of generating losses in bad times.

While prudent risk-taking is the essence of the banking business, "risk-taking in an information
vacuum, based not on sound credit judgments but on the stylishness of the borrower, can never
be prudent," Mr. Hawke said.

"Any loan officer who asks a  hot' borrower for financial information only to be told  we never
give that out,' should walk away from the credit," he added. "Advancing hundreds of millions of
dollars without adequate information simply because other creditors may be scrambling to
provide funds to some group perceived as market geniuses, is not prudent lending.  It's Russian
roulette."

Mr. Hawke said that supervisors must have more regular, ongoing dialogue than ever before.


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The OCC charters, regulates and examines approximately 2,600 national banks and 66 federal branches of foreign banks
in the U.S., accounting for more than 58 percent of  the nation's banking assets.  Its mission is to ensure a safe and sound
and competitive national banking system that supports the citizens, communities and economy of the United States.