Joseph again bridges banking commissioner gap

On April 12, 2010, after searching for 18 months, the Colorado Division of Banking welcomed Steve Strunk as the state’s new banking commissioner. Eight months later Strunk said “goodbye,” and the search begins again.

While questions still surround his short tenure, the Division of Banking has already moved on. Fred Joseph, securities commissioner, will once again wear two hats, filling in as acting state bank commissioner as he did before Strunk was appointed by Barbara Kelly, the Department of Regulatory Agencies’ executive director.

The bank commissioner oversees 107 banks and trusts. Joseph said that the current economic climate makes it all the more important for banks to be examined on a regular basis. He said while doing two jobs may be difficult, he’ll rely upon the state’s expert staff, and maybe beef up that staff.

“We are currently attempting to hire more examiners,” he said. “We are asking the state legislature to approve additional examiner positions.”

DORA’s official reason for Strunk’s departure was that he wanted to return to the private banking industry. He did well there, most recently with Kirkpatrick Bank in Colorado Springs, showing experience that seemed compatible with the commissioner’s job.

But as commissioner, Strunk was also publicly critical of the actions of bankers that led to the nation’s financial crisis, and the government fixes for it – he called them “preposterous.” Strunk reportedly stated that the industry is regulated enough and, to have prevented the current crisis, banks should have adhered to both the letter and the spirit of the law. About bank failures, he told the Boulder County Business Report in October, “It’s not the economy, it’s not real estate. The root cause of bank failure is poor management and greed.”

Contacted at his home for this story in February, Strunk wouldn’t comment on why he left the commissioner’s job. He said he was “still looking into some different things,” but didn’t want to say if a job for him in private banking had emerged.

Puzzled bankers

Strunk’s departure puzzled many in the banking community. Although Don Childears, president and CEO of Colorado Bankers Association, wasn’t 100 percent happy with Strunk’s public comments, he said that he was surprised when Strunk left.

“We were waiting to see what would develop, and then he was gone,” he said.

Strunk’s statement about the cause of bank failure left Childears cold. “Banks might play a role but you can’t rule out the economy,” Childears said.

He added that Strunk’s suggestion that bank’s CAMELS ratings be made public were another concern. Bank regulators base these ratings on the bank’s capital, assets, management, earnings, liquidity and sensitivity to systemic risk, and they are legally bound to keep them confidential.

“Publishing CAMELS ratings is against federal law,” Childears said. “The FDIC and Comptroller (of the Currency) own the ratings. The ratings are kept private to protect the public from undue panic.”

Joe Bonner, CEO of Bank of Choice, agreed with Childears that the position of banking commissioner is tough to fill right now, but that he thought Strunk wasn’t a bad choice for this time in history.

“As a career banker he was a good fit. What they have in many states is a political appointee,” Bonner said.

The Colorado banking commissioner is the administrative head of the Division of Banking, responsible for the day-to-day operation of the division and all examinations and enforcement functions, subject to the policymaking and rulemaking authority of the Banking Board. In the middle of the longest recession since the Great Depression, the role of banking commissioner expands beyond approving charters.

“If bankers were looking for a shoulder to cry on, someone in the regulatory agency wouldn’t be it,” Bonner said.

OK without a commissioner?

As for what the banking community will do without a full-time commissioner right now, it might be OK. Most Colorado banks aren’t in terrible shape, Childears pointed out.

“As an industry, Colorado banks are holding 150 percent of the capital traditionally required by regulators, and reserves to protect against loan losses have been bolstered to record levels,” he said.

Still, the failure of FirstTier Bank on Jan. 28, and the closure of United Western Bank on Jan. 21, with its assets transferred to North Carolina-based First Citzens Bank and Trust, show that every bank isn’t OK. The sooner the job is filled, the better, Childears said, noting that when the job was first posted, the compensation was low compared to private industry salaries. The Division of Banking had made a few offers, but suitable candidates didn’t really appear until more money was offered.

“We were below market,” Childears said. “They need (to find someone with) the expertise and experience of a good bank president.”

Chris Lines, DORA liaison, agreed that while compensation was an issue the first time the commissioner’s job was posted, the state reclassified the position as senior executive services to allow the salary to rise up to 25 percent over the statutory cap. Those holding positions in senior executive services are required to sign a yearly contract.

The last job posting for the position of banking commissioner by DORA, dated Oct. 14, 2009, offered an annual salary of $148,800. According to payscale.com, together with bonuses, profit sharing and commission, the average annual pay for a bank president ranges from $96,549 to $195,215.

As of March 4, the position had not been reposted. Lines said he didn’t know when the posting would appear.

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