2021 Annual Report

Read about the OCC’s strategic priorities, financial management, and regulatory and policy initiatives from 2021.

2021 Annual Report

Read about the OCC’s strategic priorities, financial management, and regulatory and policy initiatives from 2021.

2021 Annual Report

Read about the OCC’s strategic priorities, financial management, and regulatory and policy initiatives from 2021.

Comptroller's Viewpoint 

As Acting Comptroller of the Currency, I am honored to support all of the OCC employees who ensure the banks we supervise are safe and sound, provide fair access to financial services, treat customers fairly, and comply with applicable laws and regulations. My top priorities this year have been focused on addressing threats to trust in banking including the following:

  • Guarding against complacency.
  • Addressing inequality in banking.
  • Acting on climate-related financial risks.
  • Adapting to digitalization.

Guarding Against Complacency

While the federal banking system is strong, risks remain. Complacency exposes banks to risks, including overconfidence as the economy recovers. Many large banks have ambitious growth plans and robust merger outlooks. Many community banks face planning challenges, among others, and may feel compelled to grow to achieve economies of scale. When done prudently, growth can provide significant benefits to consumers, communities, investors, and the U.S. economy. When done in an unsafe, unsound, or unfair manner, growth can cause significant damage. One of our most important tasks as bank supervisors is to identify, assess, and act before growth becomes unsafe, unsound, or unfair.

In a dynamic economy, there is a constantly evolving set of products, practices, and clients that banks may elect to avoid, or limit exposure to, based on the banks’ risk appetite.

Acting Comptroller Michael J. Hsu

Michael J. Hsu
Acting Comptroller of the Currency since May 10, 2021.

More recently, at least some banks have begun to make different risk-based decisions. In some cases, banks have done the work necessary to develop risk management capabilities and have put in place the appropriate resources to engage prudently with products, practices, and clients that they previously avoided. In other cases, because of market demand and a fear of missing out on attractive profit opportunities, some banks have set aside their initial risk management concerns and engaged with risky products, practices, and clients. Assessing whether banks are appropriately controlling for various risks is a task for supervision, distinct from regulation, and a critical component of guarding against complacency in the current environment.

Complacency also exposes banks to operational risks in cybersecurity. For instance, some banks have postponed investments that update and maintain their information technology (IT) systems, complacently satisfied with current IT systems. Postponing IT updates and maintenance, however, increases operational risk.

To combat this trend, the OCC has coordinated with the Board of Governors of the Federal Reserve System (Federal Reserve Board) and Federal Deposit Insurance Corporation (FDIC) to conduct cybersecurity reviews, issued Sound Practices to Strengthen Operational Resilience, issued a notice of proposed rulemaking (NPR) on computer-security incident notification, and, in coordination with the other members of the Federal Financial Institutions Examination Council (FFIEC), issued Authentication and Access to Financial Institution Services and Systems guidance.1 The computer-security incident notification NPR’s primary purpose is ensuring that the federal banking agencies have timely notice of significant computer-security incidents affecting banks. We are reviewing comments on the NPR. We are also working with the industry to establish best practices in cybersecurity.

Being vigilant and guarding against complacency help ensure that the federal banking system remains safe, sound, and fair and can support a strong economic recovery.

Addressing Inequality in Banking

Reducing inequality can safeguard and rebuild trust in the banking system. The COVID-19 pandemic’s disproportionate effects on vulnerable communities, households, and businesses highlight our nation’s history of financial inequality. Banks can play an important role in addressing these effects.

Shortly after I took office, I initiated a review of the OCC’s June 2020 Community Reinvestment Act (CRA) rule. Taking into account the pandemic’s disproportionate impact on vulnerable communities, the comments on the Federal Reserve’s advanced notice of proposed rulemaking, and the lessons we learned from the partial implementation of the 2020 rule, the OCC proposed rescinding the OCC’s 2020 final rule and replacing it with rules adopted jointly by the OCC, Federal Reserve Board, and FDIC in 1995, as revised. The OCC issued the proposal to rescind the rule on September 8, 2021.2 Additionally, the OCC, Federal Reserve Board, and FDIC issued a statement3 publicly acknowledging that the agencies are committed to working together to strengthen and modernize the CRA regulations.

We must also prohibit predatory and discriminatory practices while promoting financial inclusion and increased access to credit for underserved communities. For example, if not managed and administered carefully, the negative effects of excess reliance on overdraft programs can disproportionately affect certain segments of bank consumers. The OCC has an internal working group examining bank overdraft programs. I look forward to seeing banks produce more innovative programs that can help customers navigate unexpected needs for credit.

Roundtable for Economic Access and Change

I strongly support the OCC’s Roundtable for Economic Access and Change, or Project REACh, established last year.4 The OCC designated a group of senior OCC staff to support the project. Through this staff, the OCC convened leaders in banking, civil rights, technology, and business to identify and reduce specific barriers that prevent underserved and minority communities from full, equal, and fair participation in the nation’s economy.

Project REACh

Project REACh identified four major barriers to financial inclusion and equity for underserved populations: lack of usable credit scores, low rates of homeownership, poor access to capital for minority-owned and small businesses, and underinvestment into trusted community institutions, such as minority depository institutions (MDI). In response, the OCC, in collaboration with Project REACh partners, formed the following national workstreams.

Inclusion for Credit Invisibles

Forty-five million Americans—disproportionately poor and minority—lack a credit score and cannot get mortgages, credit cards, or other lending products. Yet many of them show financial responsibility by paying rent, utilities, and other recurring financial obligations. Project REACh participants have been evaluating models that use alternate sources of data, such as cash flow data, rent, and utility payments, to show on-time payment history and boost the measurable creditworthiness of many Americans. Some banks participating in REACh are working with technology firms on programs to help gig workers gain credit. Reassessing what data can be used to evaluate creditworthiness could help millions of customers join the financial mainstream.

Revitalization of Minority Depository Institutions

The number of OCC-supervised MDIs has declined over the years. Those that remain are critical sources of credit and financial services in their communities but face challenges with accessing capital, adopting new technology, and modernizing their infrastructures. Last year—155 years after the founding of the Freedman’s Bank as the nation’s first MDI—REACh participant banks signed a pledge to support MDIs by providing technical assistance and investing nearly $500 million in them.5 Most recently, the OCC convened a meeting between the National Bankers Association, which represents minority financial institutions, and three of the largest service providers to midsize and community banks to assess how the association and large service providers can build better relationships with MDIs and offer MDIs affordable, innovative services.

Increasing Homeownership and Affordable Housing

Homeownership is one of the primary ways that families build wealth in America. Project REACh participants have focused on actions that can increase homeownership within underserved and minority communities. These include (1) improving the delivery of homeownership counseling to underserved and minority communities, (2) evaluating how alternative data that show payment history for rent and other recurring payments can be used more effectively in the mortgage underwriting process, (3) expanding Native American homeownership opportunities on tribal lands, and (4) promoting strategies to increase the supply of affordable home inventory and removing barriers that prevent broader market participation and scale. One of these strategies would be to convert underutilized and surplus commercial real estate into mixed-use facilities that include residential property and provide additional home-buying opportunities.6

Expanding Access to Capital for Minority-Owned and Small Businesses

Project REACh participants also are evaluating models and strategies that facilitate loan participations and consortium lending to minority-owned and small businesses. The effort involves developing a consortium model whereby MDIs, community development financial institutions (CDFI), and larger banks collaborate to support agricultural businesses and emerging commercial enterprises and industries (such as clean energy and broadband) in rural and native communities.7

To support small businesses more generally, Project REACh participants are identifying many challenges that affect affordable credit. For example, collateral requirements for financing small businesses limit economically disadvantaged communities’ access to the capital needed for entrepreneurship. In another example, many minority and women entrepreneurs, having exhausted their consumer credit capacity, need a transition to a commercial credit profile. Project REACh participants seek to help entrepreneurs meet the qualifications for small business trade lines through establishing a small business identity.

The participants are developing a comprehensive guide to provide entrepreneurs with resources to increase the chances of success. A few REACh banks have offered virtual procurement showcases for minority-owned enterprises and entrepreneurs from underserved communities to build better business relationships and provide opportunities for growth and expansion.

Area-Specific Efforts

While these four workstreams are national in scope, the path to economic inclusion is often local. Regional programs and efforts have expanded to Dallas, Detroit, Los Angeles, and Washington, D.C. Needs differ across communities and markets. That is why Project REACh includes regional programs that provide local stakeholders a direct venue to voice their needs and ideas about overcoming unique economic barriers in specific communities.

Interagency Efforts to Reduce Racial Bias in Property Appraisals

The OCC recognizes the degree to which racial discrimination and bias in property appraisals, particularly residential properties, can contribute to inequity in housing values and to a greater wealth gap between different socioeconomic communities. Although appraisers and the appraisal process are not often seen as parts of the federal banking system, there are clear intersections. Banking regulations require appraisals for certain transactions, and banks often rely on third-party appraisals in their underwriting and overall risk management practices.8

The OCC is an active member of an interagency effort to address this inequity in home appraisals9 through the Property Appraisal and Valuation Equity (PAVE) Task Force. The task force was formed in response to a June 1, 2021, directive from President Joe Biden and is led by the U.S. Department of Housing and Urban Development. The OCC is a principal participant in this effort to root out discrimination in the appraisal and home-buying process10 through potential enforcement under fair housing laws, regulatory action, and development or enhancement of standards and guidance in close partnership with industry and state and local governments. The task force is consulting with civil rights organizations, advocacy groups, industry, and philanthropic entities to drive change. It also is coordinating agencies’ efforts to identify factors that contribute to the persistent misevaluation of the value of assets in mortgage transactions.

OCC’s Commitment to a Diverse, Inclusive Workforce

Internally, we are working to reduce employment inequality and improve our own diversity and inclusion. The OCC has engaged in comprehensive hiring, recruitment, and employee retention strategies to enhance agency diversity. We also offer a wide range of formal and informal career development opportunities to provide our employees with the leadership skills that are crucial for career development.

The OCC’s eight employee network groups11 each serve as a voice communicating workplace concerns and giving management input on diversity and inclusion strategies within the agency. These groups are a valuable means of attracting and retaining employees from diverse backgrounds and creating an inclusive work environment.

Such efforts have made some progress. Over the past 10 years, the OCC’s total minority workforce has increased from 30 percent to 36 percent. Manager and senior-level manager positions held by minorities and women have also increased. Manager positions held by minorities and women increased from 21 percent to 28 percent, senior-level positions held by minorities increased from 20 percent to 25 percent, and senior-level positions held by women increased from 27 percent to 30 percent. Although the trend is positive, much more needs to be done.

The OCC issued its Annual 342 Report to Congress on March 30, 2021, outlining the actions the agency has taken relating to diversity in management, employment, and business activities, pursuant to section 34 of the Dodd–Frank Wall Street Reform and Consumer Protection Act.12

High School Scholars Internship Program

The OCC is committed to supporting diverse and inclusive development opportunities for the future workforce as well. For the third consecutive year, the OCC hosted its High School Scholars Internship Program (HSSIP), a six-week paid summer internship for nearly 100 minority students from public and charter high schools in Washington, D.C. The program gives students an opportunity to explore a variety of careers at the OCC, gain an understanding of the financial services industry, and engage in enrichment activities on financial literacy and leadership fundamentals. This year, the OCC added a bridge program for selected former HSSIP participants who are now college students. The college interns completed a 10-week summer internship. The HSSIP also included high school interns who were placed at the U.S. Securities and Exchange Commission and the National Credit Union Administration. In addition to the HSSIP, the OCC has provided minority college students with paid internships for more than a decade through the agency’s participation in the National Diversity Internship Program.

High School Scholars Internship Program

The High School Scholars Internship Program is a paid summer internship that lasted for six weeks between June 28, 2021, and August 6, 2021. The program is designed for students entering their senior year and for returning interns who recently graduated from high school.

Acting on Climate-Related Financial Risks

Multiple government agencies are charged with addressing the environmental and social problems that climate change presents. The OCC’s focus is on understanding how climate change may affect the safety and soundness, fairness, and compliance obligations of the banks we supervise.13

For banking regulators, the issue is straightforward: Banks are exposed to physical and transition risks presented by climate change. Physical risks refer to the harm to people and property arising from acute, climate-related disasters such as hurricanes, wildfires, floods, and heatwaves, as well as longer-term, chronic phenomena such as higher average temperatures, changes in precipitation patterns, sea level rise, and ocean acidification. Transition risks refer to stresses to certain institutions or sectors arising from the shifts in policy, consumer and business sentiment, or technologies associated with the changes necessary to limit climate change.

To tackle this crucial issue, the OCC is working with—and learning from—other financial regulators and authorities also addressing the financial impacts of climate change. The OCC participates in the Basel Committee on Banking Supervision’s Task Force on Climate-Related Financial Risks, which has taken stock of member initiatives on climate-related financial risks, cataloging these risks for member organizations to benefit from one another’s experience. Building on this, the OCC recently joined the Network of Central Banks and Supervisors for Greening the Financial System, a group of central banks and peer supervisors from across the globe interested in addressing climate change through the sharing of best practices and the development of climate- and environment-related risk management.

We support developing and adopting effective climate-related financial risk management, especially at large banks. The OCC’s staff is reviewing and evaluating the current range of practices, with an eye toward identifying best practices. In addition, we are developing high-level, climate-related risk management supervisory expectations for large banks and hope to issue framework guidance for comment by the end of the year.

Further, the OCC’s National Risk Committee formed the Climate Risk Implementation Committee, chaired by the OCC’s newly established Climate Change Risk Officer, to identify weather- and climate-related financial risks related to OCC-supervised institutions and provide recommendations to senior OCC leadership on the integration of these risks into OCC policy, supervision, and research. Having key personnel focused on our climate work should significantly expand the agency’s ability to collaborate with stakeholders and to promote improvements in climate change risk management at banks.14

To inform our approach to the financial stability implications of climate change, the OCC is collaborating with the U.S. Department of the Treasury, other members of the Financial Stability Oversight Council (FSOC), market participants, and international standard-setting bodies. Most recently, the OCC has collaborated with the other members of FSOC to draft a report15 required by President Biden in Executive Order 14030, “Climate-Related Financial Risk.”16

It is important to emphasize the disproportionate effect of climate change on financially vulnerable communities, potentially including lower-income communities, communities of color, and other disadvantaged or underserved communities as we address climate-related financial risk.

Acting Comptroller of the Currency Michael Hsu testifies before the Senate Banking, Housing, and Urban Affairs Committee on August 3, 2021, in Washington, D.C. The committee held a hearing on “Oversight of Regulators: Does our Financial System Work for Everyone?” (Photo by Alex Wong/Getty Images)

Acting Comptroller of the Currency Michael Hsu testifies before the Senate Banking, Housing, and Urban Affairs Committee on August 3, 2021, in Washington, D.C. The committee held a hearing on “Oversight of Regulators: Does our Financial System Work for Everyone?” (Photo by Alex Wong/Getty Images)

Adapting to Digitalization

Three related trends are driving additional change to the business of banking: (1) the mass adoption of digital technology; (2) the rise of new payment capabilities; and (3) technological innovations outside the banking system, including the digital asset and decentralized finance (DeFi) space.

Today, financial technology (fintech) companies, with their payment processing, application programming interfaces, machine learning, and distributed legers, are disintermediating banks. This trend brings promise with the potential to provide a broader range of financial services to consumers who may not have full access to the traditional banking sector; however, the trend also can give rise to a large, less regulated shadow banking system. The OCC is working with other regulatory agencies to adapt to digital technology’s impacts on the banking system and to consider the appropriate regulatory perimeter for new technologies, products, and services offered within and outside the regulated banking system.17

This year, financial regulators have sought to better understand the use of artificial intelligence when providing financial services to customers and for other business or operational purposes. We must look at appropriate governance, risk management, and controls over artificial intelligence, and any challenges in developing, adopting, and managing artificial intelligence approaches.18

As a step to increase interagency coordination, the OCC, FDIC, and Federal Reserve Board have established the Digital Assets Sprint Initiative to provide greater clarity and collaboration around digital assets, including cryptocurrencies. The initiative comprised a series of sprints focused on providing an active, coordinated, and timely response to questions and issues raised by rapid growth in this space. Sprints were defined as short time periods during which staff with different backgrounds and relevant subject matter expertise from the agencies conducted preliminary staff analysis of various issues in regard to digital assets. After completing the sprints, we will consider policy needs and identify potential next steps.19

  • The first sprint focused on developing a common taxonomy for digital assets and agreed-upon definitions to ensure a common language and understanding of the basic terms and concepts for future discussions.
  • The second sprint centered on understanding use cases and risks associated with cryptocurrencies and digital assets.
  • The third sprint concentrated on potential gaps in regulation and supervision and prioritizing those gaps for additional consideration.

As work continues to better define the regulatory perimeter, I have been reviewing the OCC’s licensing and chartering process. I agree with those who recognize that refusing to charter fintechs may encourage growth of a shadow banking system outside the reach of federal regulators. Put simply, denying a charter will not make the problem go away, just as granting a charter will not automatically make a fintech safe, sound, and fair. Recognizing the OCC’s unique authority to grant charters, we must find a way to consider how fintechs and payments platforms fit into the banking system, explore the appropriate use of regulatory tools to encourage responsible innovation, and coordinate with the FDIC, Federal Reserve Board, and the states to limit regulatory arbitrage and races to the bottom.

Pandemic Response

The global pandemic brought its own set of challenges to the federal banking system this year. Federal relief programs created to address economic problems brought by the pandemic increased the amount of deposits and other funds at community banks, posing unique challenges in the federal banking system. The rapid and unexpected increases in asset sizes resulted in the potential need to comply with additional regulations.

Recognizing that the asset growth was expected to be temporary and that this had the potential to impose an unexpected administrative burden, the OCC and other federal bank regulators adopted a rule in November 2020 to give affected banks until calendar year 2022 to reduce their size or prepare for new reporting and regulatory standards.20 We have continued to expand and update the pandemic-related frequently asked questions (FAQ) begun by the agencies in 2020. To encourage investment, the agencies published new FAQs to assist banks in determining CRA consideration for activities undertaken in response to the pandemic.21


Before I conclude, I want to acknowledge the steady leadership that Blake Paulson provided as the Acting Comptroller from January until I began in the role in May. He enabled a smooth transition for me and has continued to provide critical support to the OCC. He now serves in the new role of Senior Deputy Comptroller for Supervision Risk and Analysis, where he continues his distinguished career at the OCC.

We remain committed to ensuring that OCC-supervised banks operate in a safe and sound manner, meet the credit needs of their communities, treat all customers fairly, and comply with applicable laws and regulations. As the nation continues to emerge from the pandemic, the OCC will do its part to ensure that the federal banking system continues to serve as a source of strength to the U.S. economy, extends opportunities to underserved populations, and meets the evolving banking needs of the consumers, businesses, and communities it serves.


Michael J. Hsu
Acting Comptroller of the Currency

1 See OCC Bulletins 2020-94, “Operational Risk: Sound Practices to Strengthen Operational Resilience,” 2021-3, “Computer-Security Incident Notification: Notice of Proposed Rulemaking,” and 2021-36, “Information Security: FFIEC Statement on Authentication and Access to Financial Institution Services and Systems.”

2 See OCC Bulletin 2021-41, “Community Reinvestment Act: Proposal to Rescind and Replace Community Reinvestment Act Rule Issued in 2020.”

3 See OCC News Release 2021-77, “Interagency Statement on Community Reinvestment Act Joint Agency Action.”

4 See OCC News Releases 2020-89, “OCC Announces Project REACh to Promote Greater Access to Capital and Credit for Underserved Populations,” and 2021-79, “Acting Comptroller of the Currency Testifies on Regulatory Priorities.”

5 See occ.gov, “The Freedman’s Savings Bank: Good Intentions Were Not Enough; a Noble Experiment Goes Awry,” and OCC News Release 2020-166, “Project REACh Pledge Released to Promote Vitality of Minority Depository Institutions.”

6 See OCC News Release 2021-79, “Acting Comptroller of the Currency Testifies on Regulatory Priorities.”

7 Ibid

8 See OCC News Release 2021-66, “Remarks by the Acting Comptroller of the Currency on Reducing Bias in Real Estate Appraisals.”

9 See OCC News Release 2021-79, “Acting Comptroller of the Currency Testifies on Regulatory Priorities.”

10 “Memorandum on Redressing Our Nation’s and the Federal Government’s History of Discriminatory Housing Practices and Policies,” January 26, 2021.

11 These groups are the Coalition of African-American Regulatory Employees (CARE), Generational Crossroads, the Hispanic Organization for Leadership and Advancement (HOLA), the Network of Asian Pacific Americans (NAPA), PRIDE, the Women’s Network (TWN), the Veterans Employee Network (VEN), and the Differently Abled Workforce Network (DAWN).

12 “2020 Annual 342 Report to Congress” (March 30, 2021).

13 See OCC News Release 2021-79, “Acting Comptroller of the Currency Testifies on Regulatory Priorities.”

14 See OCC News Release 2021-78, “OCC Announces Climate Change Risk Officer, Membership in NGFS.”

15 The FSOC Report on Climate-Related Financial Risk was issued on October 21, 2021.

16 86 Fed. Reg. 27967 (May 20, 2021).

17 On November 1, 2021, the OCC, FDIC, and the President’s Working Group issued a report addressing the risks of stablecoins that have the potential to be used as a means of payment and making recommendations to address those risks.

18 See OCC Bulletin 2021-17, “Artificial Intelligence: Request for Information on Financial Institutions’ Use of Artificial Intelligence, Including Machine Learning.”

19 On November 23, 2021, the OCC, FDIC, and Federal Reserve Board issued a joint statement on the crypto-asset policy sprint initiative and next steps. See OCC Bulletin 2021-56, “Joint Statement on Crypto-Asset Policy Sprint Initiative and Next Steps.”

20 See OCC News Release 2020-157, “Agencies Provide Temporary Relief to Community Banking Organizations.”

21 See OCC Bulletin 2021-12, “Community Reinvestment Act: Interagency Frequently Asked Questions Related to the COVID-19 Pandemic.”