A successful administration of the Currency Bureau depends largely upon the efficiency of the force of national bank examiners and the thoroughness and reliability of their work in connection with the examination of banks. The Comptroller of the Currency has no means of ascertaining the condition of the banks except as reflected in the reports of the examiners. If a report shows a bank to be in a satisfactory condition, he must accept it as correctly representing its true status, if he has any confidence in the ability, integrity and judgment of the examiner who made the examination. If a condition exists other than that shown by the examiner's report, the Comptroller has no means of knowing that fact until some unexpected development brings it to his attention. If a defalcation or shortage is disclosed which the examiner failed to discover, the Comptroller could know nothing of it until revealed through some other source by accident or otherwise. If the examiner's estimate of the value of the notes, collaterals and other securities which he finds in a bank is unreliable or faulty, that fact cannot be determined by his report.
It follows, therefore, that if a successful administration of the Currency Bureau depends so largely upon the bank examiners ascertaining and reporting to a reasonable degree of certainty the true condition of the banks, the official reputation of the Comptroller and the best interests of the service in general require that the greatest care should be exercised in the selection of the men to fill these important places, not only in respect to their entire fitness by training and experience in this line of work, but as to their integrity as well, so that they can be relied upon to discharge the responsible and onerous duties which attach to the position intelligently, thoroughly and conscientiously.
No public employment calls for a higher order of ability, a more conscientious performance of duty, and greater thoroughness in every detail than the position of a bank examiner. Conscientiousness because of the great interests with which they have to deal, and which are affected thereby, and thoroughness because of the reliance that must be placed in them by their official superior and the banking public to determine the safety and solvency of every bank which they examine.
A man may be fully competent to satisfactorily discharge the important duties of a bank examiner, but unless he possesses the integrity of character that will insure absolute reliance upon a conscientious performance of duty at all times and under every condition, even to the extent of inconvenience and pecuniary loss to himself, he lacks the most essential qualification upon which the Comptroller and the banking public must rely in measuring the trustworthiness of his work.
The fee system of compensating examiners was, in a measure, responsible for some of the superficial examinations that have been made in the past, in that the aggregate monthly earnings of the examiner were dependent upon the number of examinations he made. The tendency of this was to increase the number of examinations at the expense of thoroughness. This temptation is now removed under the salary and expense method of compensation and an examiner can now be depended upon to devote as much time to each bank as may be necessary to make a thorough examination of its affairs.
The time required to make a thorough examination varies with the volume of business of the bank, the completeness of the system employed in keeping its accounts and the manner in which its business is conducted. While the statutory fee under the old system may have amply compensated the examiner in some cases for the time consumed in making thorough examinations, in other banks of the same size, or even smaller, it was wholly inadequate because of the additional time required to reach the same results, owing to the character of the paper carried, the nature of the transactions and the methods employed by the banks in keeping their books and accounts.
This fact, however, did not justify an examiner in slighting his work. He was in duty bound to make as thorough an examination of a bank of the latter class as he was of the former, and if the degree of thoroughness of his work was measured by the compensation received, then the sooner such an examiner was removed from the service the better for all concerned, as his superficial work sooner or later exposed itself, not only to his discredit, but to the discredit of the entire system of official supervision, and weakened public confidence in the efficiency of examinations in general.
The qualifications necessary to an intelligent and satisfactory discharge of the duties of a bank examiner, in addition to integrity of character, are the following:
A thorough knowledge of the principles of bookkeeping and accounting, a general knowledge of the laws governing negotiable instruments and commercial transactions, good judgment in regard to credits and values, force of character, tact and discretion.
As the books of a bank are the starting point and the foundation upon which an examination must rest, it is incumbent upon an examiner to satisfy himself that they correctly show the resources and liabilities of the bank and account for every dollar received, loaned and disbursed. To enable an examiner to determine this intelligently and with certainty, it is absolutely necessary for him to thoroughly understand accounts, so as to be able to trace an item or an entry through the books from its inception to its finish, and to properly check and verify every transaction involving the use of money, so as to be reasonably certain that no shortage exists that is concealed from him by false entries, forced balances, or a manipulation of the accounts in any other manner.
Bank examiners, however, are not bank auditors. Unfortunately, the distinction between an examination and an audit is seldom recognized in the criticisms of examiners when banks suffer losses through dishonesty or other cause which have remained concealed for some time, undiscovered by the examiner through several successive examinations. A bank that may be thoroughly examined in one or two days could not be completely audited in less time than one or two weeks.