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New banking products such as the negotiable certificate of deposit in the 1960s eased deposit shortages and added to supervision responsibilities. As banking products became more complex, compliance responsibilities for examiners increased.
The Currency and Foreign Transactions Reporting Act of 1970—commonly referred to as the Bank Secrecy Act—required U.S. financial institutions to help the federal government detect and prevent money laundering. Examiners now had to make sure banks kept appropriate records and filed certain reports to comply with the law.
The civil rights movement had ripple effects on banking, and by extension bank supervision. Bank examiners now were required to ensure that banks provided fair access to financial services, treated customers fairly, and complied with new laws.
Congress passed the Equal Credit Opportunity Act of 1974 to prevent banks and other creditors from discriminating against applicants. Then in 1975 the Home Mortgage Disclosure Act was enacted to shed light on lending patterns that could be discriminatory.
The Community Reinvestment Act of 1977 (CRA) required federal financial regulators to assess each financial institution’s record of meeting the credit needs of the entire community it served in a manner consistent with safe and sound banking operations.
“We believe that, taken together, the profitability and growth potential in U.S. retail banking markets, the obligations imposed by the Community Reinvestment Act and the Equal Credit Opportunity Act, and, most importantly, the natural play of competitive forces in the marketplace actively protect and promote the needs of consumers and of local businesses.” — John G. Heimann, Comptroller of the Currency, August 1, 1979
“We believe that, taken together, the profitability and growth potential in U.S. retail banking markets, the obligations imposed by the Community Reinvestment Act and the Equal Credit Opportunity Act, and, most importantly, the natural play of competitive forces in the marketplace actively protect and promote the needs of consumers and of local businesses.”
Within the agency, hiring practices were evolving. By the mid-1960s, new examiners had to have college degrees for the first time, and women began to take on new roles. The first all-female exam team came together in 1973; 31 women spent two weeks going over the records of United National Bank of Plainfield, N.J. “This is not a stunt,” the team’s manager said. “We are using a group of women for a surprise audit to show they are efficient and quite able to handle the job themselves.”
Prompted by the rapid evolution within the banking industry, Comptroller James Smith in 1974 commissioned a seminal study—the first-ever comprehensive review of agency practices—that directly led to major strategic and operational changes for examiner responsibilities, including a shift away from verifying assets to more sophisticated systems and risk analysis. The study also triggered the development of the OCC’s first remote monitoring system, created risk-focused exam scheduling, and established multinational, regional, and international banking programs later in the decade.
As part of these new procedures, surprise exams stopped in 1977. No longer would examiners show up unannounced with no notice to unprepared bankers.
The International Banking Act of 1978 opened the doors for foreign banks to conduct operations in the United States through a federal branch or agency.
In 1979 the OCC, through the Federal Financial Institutions Examination Council, adopted the Uniform Financial Institutions Rating System. This system took its name from the acronym for its component parts, CAMEL, which identified five distinct categories of risk.
Bank supervision requires significant data and analysis. By this time, the OCC had entered the computing age with room-size hardware that could cull through the 12 million numbers comprising all the call reports national banks submitted.
Should an employee need a copy of the condition of any bank, the division’s employees could produce a copy on microfilm in the time it took to get a cup of coffee.
Creating nicknames for examiner instruction manuals was an OCC tradition by the 1960s.
Brown Rat The best-known example was the Brown Rat (or Mouse), named for the color of the Comptroller’s Handbook of Examination Procedure cover.
White Rat The trust bank examiners’ version of similar material was dubbed the White Rate after legislation transferred responsibility for supervising trust banks to the OCC in 1962.
White Elephant The White Elephant was a tome of bank exam procedures.
Blue Goose The Blue Goose was a large three-ring binder with a baby blue cover and stuffed with all the relevant laws, regulations, and interpretations in effect in the 1970s.
Gray Goose The predecessor to today’s digital Comptroller’s Handbook originated in 1977 and was nicknamed the Gray Goose. Today’s edition is a virtual menagerie of more than 8,000 pages comprising 94 booklets that cover topics including the examination process, asset management, and consumer and securities compliance. Additional interagency materials help guide examiners in their work.
