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Supervision Program

The Office of the Comptroller of the Currency’s (OCC) supervision program is governed by two key committees. The OCC’s Committee on Bank Supervision (CBS) and National Risk Committee (NRC) include staff from the offices of the Chief National Bank Examiner, Compliance and Community Affairs, Large Bank Supervision, and Midsize and Community Bank Supervision. The CBS ensures coordination of supervisory activities, policies, and programs, and that those activities, policies, and programs are consistent with the OCC’s strategic plan and objectives. The NRC coordinates for the agency’s existing and emerging supervision and policy issues.

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Examiners in the OCC Workforce

Federally chartered banks receive consistent, bank-level supervision across examination cycles by examiners who leverage agency experts with knowledge of specific banking issues, laws, economics, accounting, innovation, information technology, and data security. OCC examiners, located in banks and OCC offices across the United States and in London, conduct on-site examinations in scheduled cycles and maintain a continuous presence in the nation’s largest banks. Bankers regularly interact with OCC examiners and other district staff who are familiar with the needs of local markets and communities.

Figure 1: Examiners in the OCC Workforce

In 2018, the percentage of OCC employees who are bank examiners was 66%.  Of those, 64% were assigned to community and midsize bank supervision, 28% were assigned to large bank supervision, and 8% were assigned to other lines of business.

Examiners analyze banks’ ability to identify, measure, monitor, and control risk, such as with banks’ loan and investment portfolios, capital adequacy, earnings, liquidity, and sensitivity to market conditions. Examiners assess corporate governance and the bank’s compliance with laws and regulations. Examiners also review internal controls, internal and external audits, and information technology systems, including with respect to cybersecurity.

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Supervision Priorities

The OCC published its supervisory priorities in its Fiscal Year 2018 Bank Supervision Operating Plan to provide the foundation for policy initiatives and supervisory strategies for individual banks. The 2018 plan focused on

  • cybersecurity and operational resiliency;
  • commercial and retail credit loan underwriting, concentration risk management, and the allowance for loan and lease losses;
  • business model sustainability and viability and strategy changes;
  • Bank Secrecy Act/anti-money laundering compliance management; and
  • change management to address new regulatory requirements.

In addition to activities at individual banks, the OCC also conducts horizontal supervisory initiatives for key risks to facilitate coordination and assessment of issues across the banking industry.

Following up on the operating plan, the OCC provided updates about risks to the federal banking system and supervisory priorities through its Semiannual Risk Perspective.

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Economic Growth and Regulatory Paperwork Reduction Act

Last year, in accordance with the EGRPRA, agencies of the FFIEC, which includes the OCC, submitted a report to Congress that identified opportunities to eliminate outdated or unnecessary regulatory requirements imposed on insured depository institutions. In 2018, the following actions occurred to implement findings made during the EGRPRA review:

  • Streamlined call report: The OCC, with other FFIEC members, finalized revisions to the call report that were proposed in June 2017 to reduce the burden associated with the report’s preparation and filing. The final revisions were announced in January and implemented in the middle of 2018.
  • Appraisal threshold: Responding to concerns about the time and cost associated with completing real estate transactions, the OCC published a final rule to increase the appraisal threshold for commercial real estate transactions from $250,000 to $500,000. The agencies originally proposed to raise the threshold to $400,000 but determined that a $500,000 threshold would materially reduce unnecessary regulatory burden and the number of transactions that require an appraisal without sacrificing safety and soundness.
  • Capital rules: To reduce regulatory burden in the capital rules on community banks, the federal banking agencies jointly issued a rule that maintains the capital rules’ 2017 transition provisions for the regulatory capital treatment of certain items. This final rule simplified certain aspects of the capital rules.
  • International capital standards: The federal banking agencies announced support to conclude efforts to reform the international bank capital standards initiated in response to the global financial crisis. They finalized the reforms to the “Basel III” agreement on bank capital standards. With this agreement, the Basel Committee brought to conclusion the international reforms initiated in response to the global financial crisis. The OCC has initiated discussions with other federal banking agencies about a strategy for implementing the Basel III revisions for large, internationally active banks.

The agencies continue to address EGRPRA comments related to flood insurance and the Depository Institution Management Interlocks Act.1

Ongoing OCC-specific projects related to EGRPRA seek to

  • integrate national bank rules.
  • remove redundant and unnecessary supervisory information requests.
  • improve examination planning.
  • make the examination process more efficient by leveraging technology.

The management team of Midsize and Community Bank Supervision

The management team of Midsize and Community Bank Supervision met in Headquarters in June. Toney Bland, Senior Deputy Comptroller for MCBS, is pictured in the front row, fourth from the right.

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Published Rules, Guidance, and Material

In addition to rules mentioned elsewhere in this report, the OCC published these rules in fiscal year 2018:

  • An interagency rule to amend swap margin requirements to conform to recent rule changes that imposed new restrictions on certain qualified financial contracts of systemically important banking organizations.
  • A final rule to shorten the standard settlement cycle for securities purchased or sold by banks.
  • A final rule to implement several technical and conforming changes to the OCC’s Annual Stress Test regulation.
  • A final rule that addresses concerns relating to the exercise of default rights of certain financial contracts that could interfere with the orderly resolution of systemically important financial firms.
  • An interim final rule with the Federal Reserve and Federal Deposit Insurance Corporation (FDIC) that expanded examination cycles for qualifying small banks and U.S. branches and agencies of foreign banks.
  • A proposed rule to amend its enforceable guidelines relating to recovery planning standards for banks that would limit the application of the guidelines to the largest, most complex banks.
  • A proposed rule, with the Federal Reserve Board, to further tailor leverage ratio requirements to the business activities and risk profiles of the largest domestic banks.
  • A proposed rule to enhance flexibility for FSAs.
  • An interagency proposed rule that would simplify certain aspects of the capital rule primarily for banks not subject to the advanced approaches capital rule.
  • An interagency proposed rule that would implement the Financial Accounting Standards Board’s Accounting Standards Update 2016-13, “Financial Instruments—Credit Losses,” in each agency’s rules.

In addition to supervisory material and guidance mentioned elsewhere in this report, in fiscal year 2018, the OCC published

  • guidelines and procedures by which the OCC implements its authority to apply prompt corrective action provisions as they relate to banks’ regulatory capital ratios.
  • guidance addressing the OCC’s framework for evaluating certain types of licensing applications when an applicant bank has a less than satisfactory Community Reinvestment Act (CRA) performance rating.
  • guidance setting forth the OCC’s policy and framework for determining the effect of evidence of discriminatory or other illegal credit practices on the CRA rating of a bank.
  • amendments to CRA regulations to conform to HMDA regulation changes and remove references to the Neighborhood Stabilization Program.
  • joint guidance to clarify the differences among supervisory guidance, laws, and regulations; reminds that guidance does not have the force and effect of law; and states that examiners may not criticize financial institutions for violations of guidance alone.
  • guidance to banks regarding the role of informal or implied expressions of support from foreign governments in determining a borrower’s obligor and facility credit risk ratings.
  • a joint statement on “Interagency Coordination of Formal Corrective Action by the Federal Bank Regulatory Agencies.”
  • a joint statement that discusses considerations for financial institutions contemplating the purchase of cyber insurance as a component of their risk management programs.
  • clarifications about data submission and penalties for HMDA data collected in 2018, and a revision to the FFIEC’s “Guide to HMDA Reporting: Getting It Right!” to assist banks in complying with the HMDA and Regulation C.
  • information about key fields agencies have determined examiners typically use to test and validate home mortgage loan data collected beginning in 2018 pursuant to the HMDA rule issued October 15, 2015.
  • an interagency announcement adjusting the definition of shared national credit, increasing the aggregate loan commitment threshold to adjust for inflation, and changing average loan sizes.
  • an interagency statement on accounting and reporting implications of the new tax law.
  • an adjustment to the maximum amount of each civil money penalty within its jurisdiction.
  • a revision to the OCC’s Approach to Federal Branch and Agency Supervision, incorporating changes in supervision processes relative to large and complex federal branches and agencies.
  • answers to frequently asked questions regarding the liquidity coverage ratio rule as interpreted by multiple agencies.
  • principles that banks should follow to prudently manage the risks associated with offering new, modified, or expanded products and services.
  • supervisory guidance and temporary exemptions to appraisal requirements for major disasters that occurred in 2018.
  • two new booklets of the Comptroller’s Handbook, “Military Lending Act” and “Recovery Planning.”
  • updates or revisions to these Comptroller’s Handbook booklets:
    • “Bank Supervision Process”
    • “Capital and Dividends”
    • “Community Bank Supervision”
    • “Compliance Management Systems”
    • “Deposit-Related Credit”
    • “Federal Branches and Agencies Supervision”
    • “Installment Lending”
    • “Large Bank Supervision”
    • “Municipal Securities Rulemaking Board Rules”
    • “Other Real Estate Owned”
    • “Retail Lending”
    • “Truth in Lending Act”
  • updates or revisions to these Comptroller’s Licensing Manual booklets:
    • “Background Investigations”
    • “Branches and Relocations”
    • “Business Combinations”
    • “Capital and Dividends”
    • “Public Notice and Comments”
    • “Subordinated Debt”
    • “Subsidiaries and Equity Investments”
  • educational resources about

2018 Capitol Hill Financial Literacy Day on April 12

Community Development Specialist Denise Murray talks with an attendee at the 2018 Capitol Hill Financial Literacy Day on April 12. The event featured more than 50 financial literacy exhibits, including this one from the OCC. More than 300 people, including members of Congress and their staffs, leaders of the financial literacy community, and the general public attended the event.

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Creating an Integrated Approach to Bank Supervision

The OCC is modernizing its approach to bank supervision through standardizing data and information, reducing duplication of effort, and leveraging technology in an integrated approach across lines of operation. The goal of the single supervisory platform project (SSPP) is to provide near real-time enterprise data, information, and analytics from which examiners and other OCC stakeholders can best draw supervisory judgments and conclusions.

In 2018, the OCC began phase I of the effort to modernize and integrate the OCC’s supervision practices, processes, systems, and tools to create a single supervisory platform. The project involves a core team of OCC staff, drawn from business units across the agency, who began work to document comprehensive business requirements, assess the capability of existing systems, and identify potential for eliminating duplicative systems. This initial work represents an interim measure in achieving the SSPP’s long-term goal of deploying a single supervisory platform by December 2020.

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1 12 USC 3201–3208.