David, I read in one of your post that we should not be afraid to challenge the examiners. We have a sitution here with a loan that we totaly disagree with the examiners on. But we do not know if we should push our luck. You know you dont want to get them upset enough to go find more problems. Has anyone ever went up against the examiners and if so was it worth it or what was your experience. They can be testy you know.

When done professionally it shouldn't be a problem. Stay away from personalizing the issue and creating a situation where someone has to win and the other side loses and you should be fine. They are people and make mistakes, the group we deal with haven't been vindictive, although it could happen. If the local examiners can't be persuaded by your argument, move to the next level. Or try an ombudsman, if one is available, if disputes can't be settled to your satisfaction.

Don is right, be professional and courteous. Also, do your research and be prepared to present your side. You can also request that the on-site examiners check with their legal department or whomever is necessary. Very often they may disagree with you but when the final report comes out the issue has been resolved and does not show up. You can always appear a negative finding to your regional director or field manager.

More often than not, the problem with "challenging" a regulatory agency or individual examiner is that the issue at hand has a level of subjectivity involved. Examiners' statements often can be subjectively interpreted -- e.g., the analysis of the loan-loss reserve needs to be "improved", an earnings policy or interest-rate risk policy requires "enhancement", or an OFAC new-customer opening process needs "improvement".

It is always fair and warranted to ask that an examiner's suggestion be made more specific in scope, to permit you to properly enact the desired control features.

Just being polite and nice in your retort, as suggested above, is assumed; but what is important is being able to competently and persuasively articulate an objective response which convinces the examiner-in-charge that you have and will continue to enact reasonable and prudent controls. The EIC is your audience; you're presenting your issue to him/her, not to the recommending examiner. Keeping your eyes and eye contact with the EIC makes it clear that he/she ultimately has to decide the relevance of the examiner's recommendation.

An examiner prior to October 1, 2003, recommended the bank engage "an automated process to perform all PATRIOT Act-required SDN listing matching". At the exit meeting the examiner-in-charge tended to back up the examiner. The bank staffperson involved was able to professionally outline the steps already taken; she pointed out that the SDN matching was already occurring using a less expensive process consisting of an Internet fee-based/per-event identifier system; and she convinced the examiner-in-charge that our actions already taken were more than reasonable for our size institution. The EIC then stated he'd review the issue, and prior to leaving the bank and out of earshot of the examiner, he stated that the matter was reviewed and that we could ignore the earlier recommendation.

Just being nice and polite doesn't do it alone. It's being able to present the issue persuasively, to build and promote respect. We all hate the word -- selling -- but that's the key. It's not important that they like you; it's important that they respect you. Sincere, persuasive, professional points that are made, and which show you are committed, will always garner the respect of the examiner-in-charge.

And there's always the ombudsman route if you're passionate and prepared to lay all of your cards on the table.

In addition to the excellent comments already stated, do not promote an adversarial relationship. Remember that while they may be opinionated and wrong on an issue, you may have missed a ruling or interpretation that they didn't. Ensure you reasonably discuss why you think an issue isn't an issue, and ask them for the same.

They don't want to be wrong either. I'd say, done right, these issues can always be worked out. But as was noted in the original question, you must decide if this is a battle you want to fight.