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Comptroller's Viewpoint

Joseph M. Otting
Comptroller of the Currency

The Office of the Comptroller of the Currency (OCC) and our federal banking system have evolved continuously in the 155 years since their creation in 1863. With $12.5 trillion in total assets today, the federal banking system serves as a source of strength and economic opportunity for our nation. Community banks remain anchors in their neighborhoods, and the nation’s most complex and internationally active banks fuel industry and economic activity on a grand scale.

The overall condition of the federal banking system is strong. The capital position and the credit quality across the system have strengthened considerably in recent years, and loan portfolios are growing. Additionally, increased liquidity has made credit more accessible. OCC-supervised banks are profitable with increasing returns on assets. We see other signs of strength in the increased interest in forming new banks and in merger and acquisition activity. I am optimistic about the direction of the country’s economy, in no small part because of the OCC’s work to support and enable a strong and resilient banking system.

As a career banker, I slept better knowing the people of the OCC were supervising my bank because the OCC provided the best supervision available—supervision that helped me manage my bank better and provided greater assurances to our boards and investors.

Joseph M. Otting  (right) became the 31st Comptroller of the Currency, after being sworn into office by Secretary of the Treasury Steven T. Mnuchin (left) on November 27, 2017.

Joseph M. Otting (right) became the 31st Comptroller of the Currency, after being sworn into office by Secretary of the Treasury Steven T. Mnuchin (left) on November 27, 2017. Also pictured is Mr. Otting’s wife, Bonnie Otting. Mr. Otting took over from Keith A. Noreika, who served as Acting Comptroller of the Currency after the 30th Comptroller, Thomas J. Curry, completed his term in May 2017. Photo credit: Andrew Harrer/Bloomberg via Getty Images.

As a banker and now as the Comptroller, I understand the precautions and safeguards implemented after the global financial crisis. After 10 years, we need to take stock of which policies continue to serve the needs of the nation and which could be revisited so that banks could fulfill more of their potential to promote economic opportunity and create jobs.

Economic Growth, Regulatory Relief, and Consumer Protection

This year, Congress restored an important balance to the business of banking by providing common-sense, bipartisan reforms that reduced unnecessary burden on small and midsize institutions while maintaining safeguards that protect the financial system and consumers.

The Economic Growth, Regulatory Relief, and Consumer Protection Act (Economic Growth Act), enacted in May 2018, made meaningful changes to the laws governing our nation’s financial system. The new law benefits community banks in particular and reflects the OCC’s legislative recommendations from previous years.

With passage of the Economic Growth Act, the financial regulators have worked closely and cooperatively to implement reforms quickly. Consumers, businesses, and communities alike will benefit from these tailored reforms for many years.

Comptroller Otting participated in the Economic Growth Act signing ceremony held by President Donald J. Trump on May 24, 2018.

Comptroller Otting participated in the Economic Growth Act signing ceremony held by President Donald J. Trump on May 24, 2018.

Comptroller’s Priorities

While the Economic Growth Act makes progress toward rebalancing our regulatory framework, there is more to do. My immediate priorities for the agency focus on helping banks promote economic opportunity while continuing to operate in a safe, sound, and fair manner. Those priorities include

  • modernizing the regulatory approach to evaluating performance under the Community Reinvestment Act (CRA) to encourage more lending and investment where they are needed most.
  • increasing consumer choice within the federal banking system to meet consumers’ short-term, small-dollar credit needs.
  • reducing the burden involved in complying with the Bank Secrecy Act (BSA) and anti-money laundering (AML) requirements while protecting the financial system.
  • simplifying the Volcker Rule and regulatory capital requirements.
  • encouraging responsible innovation to enhance the federal banking system, increase choice, and meet the evolving needs of consumers, businesses, and communities.
  • operating the OCC efficiently and effectively, and empowering employees through active engagement.

Modernizing the Regulatory Approach to the CRA
The CRA promotes the vitality of our neighborhoods and encourages lending, investment, and other banking activities that stimulate economic opportunity and serve the needs of low- and moderate-income communities across the nation. Despite its benefits, I have seen how CRA regulations can fail to incentivize needed lending or can lead to investment deserts unreached by CRA activity. We have a once-in-a-generation opportunity to build on a 40-year legacy of community development and make the CRA work better for everyone.

Over the four decades of the CRA’s existence, the regulations implementing the law have become cumbersome, complex, and outdated. Regulations have failed to keep up with the evolution of how banks deliver services, especially because of interstate branching and the digitization of services. Another drawback of the current approach is the fact that performance evaluations take too long, lack transparency, and suffer from subjectivity that causes inconsistency from bank to bank. This inefficiency wastes resources and frustrates community members, bankers, and regulators alike.

CRA modernization can

  • increase bank lending, investment, and services where they are needed most.
  • establish a clear, metric-based framework for assessing CRA performance.
  • clarify and expand activities eligible for CRA consideration.
  • make evaluations more transparent, objective, and timely.

Throughout the year, I met with community leaders, civil rights advocates, bankers, and other regulators to discuss the opportunity to improve the CRA. The vast majority agrees that it is time.

We took an important initial step toward modernizing our approach to the CRA regulations by releasing an advance notice of proposed rulemaking in August 2018 seeking stakeholder comment. I look forward to working with other federal regulators toward a joint proposed rule in 2019. I am confident we can improve the regulations implementing the CRA to better meet the credit needs of our communities, including low- and moderate-income neighborhoods, consistent with safe and sound operations.

Increasing Consumer Choice With Short-Term, Small-Dollar Lending
Millions of U.S. consumers rely on short-term, small-dollar loans each year. Because banks have nearly opted out of this market, consumers have fewer choices. Fewer choices and less supply lead to higher prices and less favorable terms for individuals who rely on short-term credit to make ends meet.

Consumers need safe, affordable choices, and banks should be part of that solution. While banks may not be able to serve all of this market, they can reach a significant portion of it and bring more competition to the marketplace.

Bank-offered products can lead consumers on the financial fringe to more mainstream services without trapping them in cycles of debt. Strategies could include working with consumers who have an ability to repay a loan despite a credit profile that is outside of a bank’s typical underwriting standards for credit scores and repayment ratios.

We made progress by publishing a bulletin in May 2018 encouraging banks to offer short-term, small-dollar loans.

Comptroller Otting discussed the federal banking system and his priorities as Comptroller with editors of Banking Exchange during an interview in his office at OCC Headquarters in February.

Comptroller Otting discussed the federal banking system and his priorities as Comptroller with editors of Banking Exchange during an interview in his office at OCC Headquarters in February.

Enhancing BSA/AML Compliance
The BSA/AML laws and regulations exist to protect our financial system from criminals who attempt to exploit the system for illegal purposes, including financing terrorism. Bank regulators, law enforcement, national security personnel, and bankers must continually adapt to increasingly sophisticated activities of criminals and other illicit actors.

The process for complying with current BSA/AML laws and regulations has, however, become inefficient and costly. Today, numerous Suspicious Activity Reports are filed annually, and banks expend considerable resources each year on reporting and other compliance activities. We need to work with the Financial Crimes Enforcement Network (FinCEN) and our fellow regulators to reform the BSA/AML regulations to be more efficient while improving the ability of the federal banking system and law enforcement to safeguard the nation’s financial system.

This year, regulators, FinCEN, and the U.S. Department of the Treasury established a working group to discuss how to make BSA/AML compliance more effective and efficient. Such open communication is a step in the right direction and stirs optimism for reform.

Simplifying the Volcker Rule and Capital Requirements
After the global financial crisis, bankers, regulators, and policymakers responded by focusing on eliminating irresponsible risk-taking and improving the quality and quantity of capital and liquidity in the federal banking system.

With the other agencies that administer the Volcker rule, the OCC proposed changes to simplify the rule’s requirements this year. These proposed changes are intended to reduce burden and improve the agencies’ implementation of the Volcker rule by providing greater clarity and regulatory certainty.

While recapitalization of our banking system has been a great success, calculating regulatory capital has become too complex. This complexity results in inefficiency and places an unnecessary burden on banks, particularly on sound community and midsize banks. The Economic Growth Act pointed us in the right direction to fix these issues, but there is more to do.

Comptroller Otting hosted a gathering of former Comptrollers and former Acting Comptrollers to mark the agency’s 155th anniversary.

Comptroller Otting hosted a gathering of former Comptrollers and former Acting Comptrollers to mark the agency’s 155th anniversary. As part of the gathering, Comptroller Otting engaged the group in a discussion about their tenures and the future of the agency and the federal banking system. Pictured from left to right are Robert L. Clarke (1985–1992), John D. “Jerry” Hawke Jr. (1998–2004), James E. Smith (1973–1976), John C. Dugan (2005–2010), Joseph M. Otting (2017–present), Keith A. Noreika (Acting May 2017–November 2017), Julie L. Williams (Acting April 1998–December 1998 and October 2004–August 2005), John G. Walsh (Acting August 2010–April 2012), Eugene A. Ludwig (1993–1998), and Thomas J. Curry (2012–2017).

Encouraging Responsible Innovation
As it has done in the past, the federal banking system must evolve and embrace innovation to meet changing customer needs and to continue serving as a source of strength for the nation’s economy. Responsible innovation provides consumers with greater choice and promotes financial inclusion by delivering products and services in more efficient and effective ways.

After thoughtful research, review of public comments, and broad outreach to stakeholders over the past two years, the OCC announced in July 2018 that we would begin accepting applications for national bank charters from nondepository financial technology (fintech) companies engaged in the business of banking. A special purpose charter allows fintech companies engaged in the business of banking the opportunity to provide innovative banking products and services on a national scale, while being regulated like similarly situated national banks. This decision also signifies the OCC’s continued ability and willingness to evolve while still ensuring the safety and soundness of the federal banking system. Providing a path for fintech companies to become national banks also makes the federal banking system stronger by promoting economic growth, modernization, and competition.

Operating the Agency Efficiently and Effectively
Ensuring the OCC operates efficiently and effectively allows us to succeed in our mission, to be a responsible steward of every assessment dollar collected, and to maintain a professional and inspiring workplace for the men and women who serve our nation by supervising the federal banking system.

Since I arrived at the OCC, we have improved the agency’s decision-making processes, reduced costs through gaining efficiencies, made better use of technology, and started an initiative to modernize our supervisory approach. As a result of such efforts, we reduced our spending for 2018 by nearly $100 million from what we had originally planned. As the agency looks toward fiscal year 2019, we will think even more critically and creatively about what we need to perform our jobs successfully while planning to reduce our costs further.


All of these priorities affected the OCC’s new strategic plan published in September. This plan reaffirms the agency’s mission and vision and articulates three broad goals, which will guide the OCC’s work over the next five years.

The world’s most respected banking system requires the OCC as the preeminent prudential supervisor to ensure the nation can always rely on our federal banking system. With my long history as a banker regulated by the OCC, I know firsthand the value of quality supervision and where opportunities exist to improve. I look forward to continued work with the men and women of this great agency, my fellow regulators, Congress, and our constituents to advance the strength and long-term health of the banks we supervise and improve their ability to meet their communities’ needs.

Joseph M. Otting
31st Comptroller of the Currency

About This Report

The fiscal year 2018 Annual Report provides Congress with an overview of the condition of the federal banking system.1 The annual report discusses the OCC’s strategic priorities and details agency regulatory and policy initiatives. Additionally, the report discusses the agency’s financial management and condition, including its audited financial statements.

1 Unless otherwise noted, all references to 2018 in this report refer to the fiscal year ending September 30, 2018.