Not Obama's OCC: Agency sets ambitious reg relief agenda
April 15, 2018 10:00 PM
Andrew Harrer/Bloomberg
Comptroller of the Currency Joseph Otting took office only late last year, but he is wasting little time in tackling a series of hot-button topics, including easing anti-money-laundering regulations and lowering national bank fees.
In so doing, he's also making it clear that the agency is going in a different direction than in the Obama era, when Thomas Curry was comptroller. Curry's agenda was focused on ensuring examiners are not too close to the institutions they oversee and offering fintechs a charter so they can comply with national standards. Otting has scrapped Curry's plan to move examiners out of the bank and seems lukewarm at best on the fintech charter.
Following is a look at Otting's agenda.
Community Reinvestment Act
Among the most controversial issues is CRA reform. Lenders and consumer groups alike have long argued the regulations governing the law, which have not been updated in more than two decades, are stale. But finding a reform plan that can satisfy both sides is tricky.
The OCCis expected to release an advanced notice of proposed rulemaking soon which will ask commenters to weigh in on a number of questions. Among them will be what metric can be used to determine if a bank has met its CRA obligations.
"There’d be no magic,” Otting said last week. “And so every three years, when the CRA exam occurs, you’d know where you were so you wouldn’t have any questions.”
Exactly what that metric will be is unclear. He also wants to speed up the process, which typically lags by more than a year, so that the OCC can release real-time data.
The OCC “will have real-time data every quarter, where we can basically certify that you’re in compliance with CRA," Otting said.
Otting has also suggested that regulators should move away from using geographic location as a core part of CRA, noting that many banks offer digital offerings that are not tied to branch locations.
In so doing, he's also making it clear that the agency is going in a different direction than in the Obama era, when Thomas Curry was comptroller. Curry's agenda was focused on ensuring examiners are not too close to the institutions they oversee and offering fintechs a charter so they can comply with national standards. Otting has scrapped Curry's plan to move examiners out of the bank and seems lukewarm at best on the fintech charter.
Following is a look at Otting's agenda.
Community Reinvestment Act
Among the most controversial issues is CRA reform. Lenders and consumer groups alike have long argued the regulations governing the law, which have not been updated in more than two decades, are stale. But finding a reform plan that can satisfy both sides is tricky.
The OCC
"There’d be no magic,” Otting said last week. “And so every three years, when the CRA exam occurs, you’d know where you were so you wouldn’t have any questions.”
Exactly what that metric will be is unclear. He also wants to speed up the process, which typically lags by more than a year, so that the OCC can release real-time data.
The OCC “will have real-time data every quarter, where we can basically certify that you’re in compliance with CRA," Otting said.
Otting has also suggested that regulators should move away from using geographic location as a core part of CRA, noting that many banks offer digital offerings that are not tied to branch locations.
Gary Tramontina/Bloomberg
Small-dollar lending
Otting now runs an OCC that is significantly more receptive to banks being active in small-dollar lending. Before he was sworn in, the agency rescinded a 2013 guidance that had effectively banned banks from offering deposit advance products. More recently, the OCC ended its 2002 regulatory order against the payday lender Ace Cash Express, allowing the Texas company to partner with national banks.
The recent moves are a marked change from the agency’s views on payday lending over a decade ago. In 2003, then-Comptroller of the Currency John D. Hawke Jr. told payday lenders, “Stay the hell away from national banks.” Otting hassung a different tune , saying that banks should become active in small-dollar lending once again.
“We forced banks out of that small-ticket and consumer lending” business, where some rules required “full underwriting for a $500 loan that just don’t make sense,” hesaid at an industry conference on April 9. “We really want more banks back in that space, because you will do it at a fairer, cheaper and with better rates issued than anybody else.”
The recent moves are a marked change from the agency’s views on payday lending over a decade ago. In 2003, then-Comptroller of the Currency John D. Hawke Jr. told payday lenders, “Stay the hell away from national banks.” Otting has
“We forced banks out of that small-ticket and consumer lending” business, where some rules required “full underwriting for a $500 loan that just don’t make sense,” he
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Bank Secrecy Act reform
The OCC is working on a set of recommendations for the Treasury Department's Financial Crimes Enforcement Network to give banks more flexibility when it comes to compliance with the Bank Secrecy Act and other anti-money-laundering laws.
Ottinghas argued that the system is too focused on penalizing institutions when they let something slip through, and not enough on the overall risk management process.
"We’ve agreed we would come back to them with recommendations on how we would like to offer bank flexibility and some variances on the examination process,” Otting said last week. “There’s a lot of things we can do to solve this BSA/AML issue without disrupting the intent. It’s kind of gotten to a ‘gotcha’ system. I think we need to step back from that and say what can we do to not put all that onerous responsibility on financial institutions.”
Otting
"We’ve agreed we would come back to them with recommendations on how we would like to offer bank flexibility and some variances on the examination process,” Otting said last week. “There’s a lot of things we can do to solve this BSA/AML issue without disrupting the intent. It’s kind of gotten to a ‘gotcha’ system. I think we need to step back from that and say what can we do to not put all that onerous responsibility on financial institutions.”
Jay Mallin
Volcker Rule simplification
The OCC started the process for simplifying the Volcker Rule's ban on proprietary trading in August, before Otting took office, as part of a push by then acting Comptroller Keith Noreika.
The agency asked a series of questions about simplifying the Volcker Rule. While regulators want to move quickly to do so, it is likely to take significant time. Under the Dodd-Frank Act, five different agencies have oversight of the regulation, meaning they all must sign off on changes.
The House passed a bill Friday that would let the Federal Reserve be the sole decision-maker on the rule. But that legislation is unlikely to be cleared by the Senate, leaving the Fed, OCC, FDIC, the Securities and Exchange Commission and the Commodity Futures Trading Commission in the mix together.
The agency asked a series of questions about simplifying the Volcker Rule. While regulators want to move quickly to do so, it is likely to take significant time. Under the Dodd-Frank Act, five different agencies have oversight of the regulation, meaning they all must sign off on changes.
The House passed a bill Friday that would let the Federal Reserve be the sole decision-maker on the rule. But that legislation is unlikely to be cleared by the Senate, leaving the Fed, OCC, FDIC, the Securities and Exchange Commission and the Commodity Futures Trading Commission in the mix together.
Andrew Harrer/Bloomberg
Bank fees
Otting surprised some observers last week by saying he wants to change how his agency's budget is structured.
The OCC is paid via exam fees assed on the national banks it supervises. Otting says that banks should pay less in relatively good economic times and prepare for an increase in fees when the system becomes more stressed.
“We are somewhat like firemen where we should be able to run in and ask for resources when the industry is going through stress times, and we should be able to pull back in times like today,” he said last week.
As a result, he is planning to lower exam fees for national banks next year.
The OCC is paid via exam fees assed on the national banks it supervises. Otting says that banks should pay less in relatively good economic times and prepare for an increase in fees when the system becomes more stressed.
“We are somewhat like firemen where we should be able to run in and ask for resources when the industry is going through stress times, and we should be able to pull back in times like today,” he said last week.
As a result, he is planning to lower exam fees for national banks next year.
Pete Marovich/Bloomberg
Fintech charter?
One area where Otting hasn't made his views clear is the agency's proposed fintech charter. His predecessor, Thomas Curry, called for the creation of a charter that would allow fintech firms to follow banklike rules in return for a single national standard of regulations. Though the OCC is not even taking applications, it is already the subject of a lawsuit from state regulators who claim that the agency lacks authority to offer such a charter.
Otting said last week that if the OCC did offer a charter, it would ensure that all firms that opted for it had to follow the same rules as other national banks, including some type of CRA element. But he said he had not made up his mind about the issue, saying a decision is expected in the next few months.
Otting said last week that if the OCC did offer a charter, it would ensure that all firms that opted for it had to follow the same rules as other national banks, including some type of CRA element. But he said he had not made up his mind about the issue, saying a decision is expected in the next few months.
