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Three years after passage of the Dodd-Frank Act, many bankers are still anxious as they wait for some rules to be written and others to be implemented. Yet a new set of regulatory and legislative challenges looms.
September 23 -
You would be forgiven in thinking the OCC has been solely preoccupied with JPMorgan Chase in recent days, but the agency has disciplined three other national banks since late August, according to its monthly roundup of enforcement actions.
September 23 -
Regulators slapped Toronto-Dominion Bank's main U.S. unit with more than $52 million in fines for violating the Bank Secrecy Act and securities laws in relation to a Ponzi scheme in Florida.
September 23 -
The various orders, fines and acknowledgements of guilt made by JPMorgan Chase on Thursday over the London Whale and other issues will have enormous implications for the rest of the industry. Here's why.
September 19
WASHINGTON Large national banks can no longer do the bare minimum to meet their regulatory responsibilities.
That was the central message of a speech Monday from Comptroller of the Currency Thomas Curry, who said his agency is following up its flurry of recent high-profile enforcement actions with formal enhanced supervisory standards for large banks that suggest institutions will have to go the extra mile to satisfy examiners' criteria.
Curry, speaking at American Banker's Regulatory Symposium, said the Office of the Comptroller of the Currency plans to issue new "heightened expectations" guidelines. Under the program, he said, just checking regulatory boxes is no longer good enough.
"As part of this 'heightened expectations' program, we are insisting that internal controls and audit be raised to the standard of 'strong' and we are making it clear that satisfactory ratings are not acceptable," said Curry. The OCC has "refined the program" following the financial crisis, but will "formalize" the standards soon under new guidance, he said.
"We expect boards of directors to be significantly engaged and to have the knowledge and focus to present a credible challenge to management," Curry said. "And we expect large institutions to have a rigorous process in place to ensure that they are attracting and retaining the kind of talent they need to manage their business in a safe and sound manner."
Just a few hours prior to Curry's speech, the OCC
But just as it forces banks to step up, Curry said the agency continues to assess its own performance as the OCC too has endured criticism for its role leading up to the crisis.
"Just as we are holding our banks to heightened expectations for governance, we have also subjected our own processes to intensive scrutiny and, where we find we have fallen short, we are taking steps to improve," Curry said. "The fact is, there is plenty of blame to go around for the problems we've seen in recent years, both in the run-up to the financial crisis and in its aftermath, and some of it falls squarely on the shoulders of the regulatory agencies, including the OCC."
Curry fully acknowledged that the OCC and other regulators flunked when it came to detecting risks in the system, such as in their enforcement of anti-money laundering laws.
"While it's true, for example, that a number of large banks failed to maintain adequate anti-money laundering programs, it's also true that supervisors didn't do as well as we should have in detecting problems and ensuring that they were effectively addressed," he said. "And while it's true that many of our large banks made a mess of foreclosure processing and mortgage servicing, it's also true that the regulatory agencies, including the OCC, did not recognize the significance or scope of those operational risk problems until we ramped up our supervision of foreclosure processing and mortgage servicing, which ultimately resulted in major enforcement actions."
Curry said the OCC's executive team has recently instituted an "enterprise governance" unit to review the effectiveness of its various functions. The agency is also digging into "material loss reviews" inspector general reports following a bank failure that, among other things, identify past lapses in how the institution was supervised to find ways to improve its examination process.
"Bringing the eye of an experienced examiner to bear on the supervisory history that ultimately led to a failure provides a different and very useful perspective," Curry said. "So every failure of a national bank or federal savings association is scrutinized closely by our Enterprise Governance unit, which includes seasoned examiners among its staff. The work Enterprise Governance does helps us identify ways to improve our supervision."
The OCC is also subjecting its supervisory program to independent evaluations by regulators in other countries.
"We have arranged for senior supervisory personnel from three countries that exhibited great resilience during the financial crisisAustralia, Singapore and Canadato participate in an independent peer review of the process we use for the supervision of large banks and thrifts, including the very largest institutions in our midsize group," Curry said. "This initiative will involve a very broad review of how we go about the business of supervision. We'll be looking at everything from agency culture to our approach to risk identification, and we'll be looking for gaps in the system that might have led us to miss problems in the past."