State regulators drop push to mandate secrecy on troubled-bank actions

State banking regulators have dropped a controversial proposal to explicitly exempt from public disclosure their enforcement actions against troubled banks.

The proposal was in a package of bills aimed at updating state laws governing banks, thrifts and credit unions. One provision would broaden the grounds under which the state Department of Financial Institutions can discipline or seize problem institutions.

Enforcement actions short of outright seizure, such as ordering banks to raise more capital or restrict certain kinds of lending, are routinely made public by federal authorities. But Washington regulators have never disclosed such actions on their own.

The proposal in question would have written that policy into law, specifically exempting enforcement actions from Washington's public-records law.

But media lobbyists and open-government advocates objected, arguing the language of the proposal was overly broad.

Despite dropping the measure, the department will continue its policy of keeping bank enforcement actions secret, out of concern that disclosure could spark crippling deposit runs and force banks to be closed prematurely.