NR 2000-15
FOR IMMEDIATE RELEASE                  Contact: Kevin Mukri  (202) 874-5770
March 7, 2000

                                    
                                    
             OCC Reemphasizes Importance of Internal Controls
                       and Audit at National Banks

SAN ANTONIO --Comptroller of the Currency John D. Hawke, Jr. told
bankers today that too many institutions are allowing internal
controls to slip and said his agency is  reconcentrating its
supervisory focus on internal controls and audits" as a result.

"Where effective policies and procedures, and the will to enforce
them, strike us as lacking, we will bring our concerns to the
attention of management and the board, and make clear their
responsibility in this area," he said in a speech to the annual
convention of the Independent Community Bankers of America.

The Office of the Comptroller of the Currency has become
increasingly concerned about the quality of audit and internal
control functions at many banks, Mr. Hawke said.

"We've noted with dismay cut backs in the size, status,
independence and proficiency of many banks' internal audit
departments," he said.

"And we've identified --and criticized --the emerging subculture in
bank management that, under pressure to maximize earnings, accepts
a higher risk of operational losses stemming from weak internal
controls in return for whatever quick savings might be realized by
failing to make those controls more robust," he added.

Mr. Hawke said that community banks are as vulnerable as large
banks to risks from inadequate internal controls.   "Large banks
may have more to lose in dollar terms when internal controls slip,"
he said.  "But community banks' smaller margins for error make them
no less vulnerable to such slippage."

The OCC gives its examiners the discretion to tailor procedures to
individual banks.  As a result, while the OCC strongly believes
that all banks should have the benefits of an external audit, the
agency recognizes that there are a number of ways to accomplish
that goal, from full financial audits by independent public
accountants to directors' examinations performed by other
independent parties.

However, as part of every examination, OCC examiners are required
to include their conclusions about a bank's performance on
external audits in the report of examination and in their summary
discussions with bank management.

Mr. Hawke told the community bankers that while supervisory
oversight is critical, supervisory intervention should always be
a last resort.

"We bring a useful outside perspective to your business," he
said.  "But if we find weaknesses in your audit or control
environment or have the ability to catch a problem before you do,
then you may have an issue requiring your board's attention."


The OCC charters, regulates and examines approximately 2,400 national banks
and 59 federal branches and agencies of foreign banks in the United States,
accounting for 59 percent of the nation's banking assets.  Its mission is to
ensure a safe, sound and competitive national banking system that supports the
citizens, communities and economy of the United States.