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Supervision

Supervision Priorities

The Office of the Comptroller of the Currency (OCC) published its supervisory priorities in its Fiscal Year 2017 Bank Supervision Operating Plan to provide the foundation for policy initiatives and supervisory strategies for individual banks. The agency’s supervisory strategies for FY 2017 focused on

  • commercial and retail loan underwriting.
  • business model sustainability and viability.
  • operational resiliency.
  • Bank Secrecy Act/Anti-Money Laundering (BSA/AML) compliance management.
  • 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 that cut across the banking industry. In 2017, the OCC conducted horizontal reviews related to cybersecurity, sales practices, shared national credits, stress testing, and underwriting.

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.

Enhancing Supervision

The OCC’s Committee on Bank Supervision (CBS) and National Risk Committee (NRC) include staff from CNBE, Compliance and Community Affairs (CCA), Large Bank Supervision (LBS), and Midsize and Community Bank Supervision (MCBS). 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 serves as a central point of coordination for the agency’s existing and emerging supervision and policy issues, including recommended actions to address such issues.

In 2017, the OCC published the following supervisory material and guidance:

  • Risk management guidance for higher-loan-to-value lending programs in communities targeted for revitalization.
  • Interagency guidance about the regulatory capital treatment of certain centrally cleared derivative contracts.
  • New guidance addressing the OCC’s expectations for compliance by national bank swap dealers with minimum variation margin requirements that became applicable this year.
  • Supplemental procedures promoting consistency when examining banks’ risk management of third-party relationships, as well as a set of frequently asked questions regarding third-party relationships.
  • Guidance regarding the periodic evaluation of the risks related to foreign correspondent accounts that describes corporate governance best practices and reiterates the expectation that banks should periodically reevaluate and reassess this risk.
  • A new “Retail Lending” booklet and revisions of other booklets in the Comptroller’s Handbook, including:
    • “Bank Premises and Equipment”
    • “Community Bank Supervision”
    • “Consigned Items and Other Customer Services”
    • “Flood Disaster Protection Act”
    • “Foreword”
    • “Internal and External Audits”
  • Guidance that advises banks to prepare for changes in the regular securities settlement cycle for most U.S. securities transactions in advance of the effective date this year.
  • Updates to OCC policies and procedures regarding violations of laws and regulations that emphasize timely detection and correction of violations before they affect a bank’s condition.
  • Interagency frequently asked questions explaining the new accounting standard for the current expected credit losses methodology that estimates allowances for credit losses.
  • Revisions to the Uniform Interagency Consumer Compliance Rating System to reflect regulatory, supervisory, technological, and market changes since the system was established.
  • Revisions to interagency examination procedures for the Military Lending Act (MLA) that reflect the expansion of MLA protections, rules for determining the fees and charges, optional safe harbor availability to creditors, required disclosures, and limitations on consumer credit extended to covered borrowers.
  • Interagency HMDA Examiner Transaction Testing Guidelines applicable to Home Mortgage Disclosure Act (HMDA) data collected in or after 2018.
  • Two new booklets of the Comptroller’s Licensing Manual, “Articles of Association, Charter, and Bylaw Amendments” and “Substantial Asset Changes, Including Changes in Charter Purpose.” Additionally, the OCC updated the following Comptroller’s Licensing Manual  booklets:
    • “Branch Closings”
    • “Change in Bank Control”
    • “Changes in Directors and Senior Executive Officers”
    • “Changes of Corporate Title and Address”
    • “Conversions to Federal Charter”
    • “Failure Acquisitions”
    • “Fiduciary Powers”
    • “General Policies and Procedures”
    • “Management Interlocks”
    • “National Bank Director Waivers”
    • “Public Notice and Comments”
    • “Termination of Federal Charter”

Compliance and Community Affairs (CCA)

The CCA Department serves as the agency’s compliance technical expert; monitors risk with regard to consumer compliance, CRA, fair lending, and BSA/AML; and develops related compliance supervisory policy. CCA coordinates with CNBE to ensure consistency in supervisory policies. CCA also provides input for the compliance examination strategy development within LBS and MCBS, and issues annual compliance strategy guidance to those business units. Compliance strategies are risk-based, except when examinations are mandated by statute or agency policy, and may be adjusted in response to emerging risks and supervisory priorities, including the impact of new regulations or amendments to existing regulations. Established in 2016, CCA continued to evolve and became operational with the responsibility to

  • develop consistent policy, guidance, and examiner training related to the CRA, fair lending, the BSA, and other compliance areas.
  • support the supervisory process and enterprise-wide risk identification, monitoring, and reporting across the OCC’s supervision activities.
  • provide outreach to bankers and community-focused organizations, promoting community reinvestment and economic empowerment.

Community Reinvestment


Grovetta Gardineer, Senior Deputy Comptroller

Grovetta Gardineer, Senior Deputy Comptroller for Compliance and Community Affairs, spoke at the NeighborWorks National Training Institute in Philadelphia in August 2017, celebrating the 40th anniversary of the CRA. “I firmly believe that in a competitive and changing environment, the most successful banks will be those that provide fair access to all potential customers, including individuals outside the financial mainstream,” Ms. Gardineer said during her speech. Photo credit: NeighborWorks America

CRA: The OCC recognized the Community Reinvestment Act's (CRA’s) 40-year anniversary in 2017, affirming that banks that integrate CRA performance and compliance into their core business operations, and commit the dedicated leadership, staff, and resources necessary to produce strong performance in these areas, are best positioned to succeed and grow over the long term. In 2017, the OCC improved its supervisory capabilities with regard to CRA compliance by

  • improving its CRA performance evaluation process, for example, by increasing the notification time frame for upcoming CRA evaluations.
  • reducing the backlog of CRA performance evaluations.
  • developing new examination tools to support more rigorous performance evaluation and promote more transparency in written CRA performance evaluations.
  • enhancing the agency’s understanding of banks’ CRA performance within the context of their unique business operations.
  • co-hosting training for examiners addressing community reinvestment following the publication of interagency CRA guidance.

The OCC participated in Financial Literacy Day on Capitol Hill

The OCC participated in Financial Literacy Day on Capitol Hill in March 2017. The agency highlighted products, services, and initiatives focused on community development, investments, and services aimed at traditionally underserved market segments.

Revitalization, stabilization, and redevelopment: The rehabilitation of abandoned or distressed housing stock is an important component of the efforts to strengthen communities. Depressed housing values in certain communities inhibit mortgage lending, and the high cost of home repairs can constrain housing rehabilitation by exceeding a home’s after-rehabilitation appraised value. Recognizing this, the OCC issued guidance in 2017 to help banks better manage the risks from residential mortgage loans with a higher-loan-to-value ratio at origination. The guidance articulates supervisory considerations regarding programs to originate certain higher loan-to-value ratio loans and the circumstances under which banks may establish them.

Banks are using innovative approaches to help preserve the nation’s supply of affordable multifamily rental properties, ranging from predevelopment financing to new debt products and mission-driven equity investment structures.

Community affairs outreach: The OCC co-sponsored nearly 100 community-focused events in 2017. Topics included rural and affordable housing, interagency bank and community development financial institution funds, the CRA, community development, and lending to small businesses.

In 2017, the OCC published or updated educational resources about

Consumer Protection
Prudent change management processes are important during the implementation of new regulatory requirements. New or amended regulations pose challenges to change management processes and increase operational, compliance, and other risks. Recent changes include the integrated mortgage disclosures under the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA), and the new requirements under the amended regulation implementing the MLA.

Uniform Interagency Consumer Compliance Rating System: OCC staff worked with the Federal Financial Institutions
Examination Council (FFIEC) Task Force on Consumer Compliance to develop extensive revisions and updates to the Uniform Interagency Consumer Compliance Rating System. The revisions reflected regulatory, supervisory, technological, and market changes since the system was established in 1980. Effective March 31, 2017, the revisions were designed to better reflect current consumer compliance supervisory approaches and to more fully align the consumer compliance rating system with the agencies’ current risk-based, tailored examination processes. Under risk-based supervision, examiners tailor supervisory activities to the size, complexity, and risk profile of each institution and adjust these activities over time.

Establishing incentives for institutions to promote consumer protection by preventing, self-identifying, and addressing compliance issues in a proactive manner was an important driver when developing the new rating system. Therefore, the revised rating system recognizes institutions that consistently adopt these compliance strategies. The new rating system also promotes coordination, communication, and consistency among the agencies, consistent with their respective supervisory authorities for banks and nonbanks.

Compliance training: OCC staff members enhanced supervision by identifying consumer compliance risks and communicating with examiners, bankers, service providers, and industry groups. In 2017, the OCC provided classroom sessions for more than 300 precommissioned and commissioned examiners. In addition, compliance supervision subject matter experts conducted training sessions in the four districts and their field offices on a monthly basis. In 2017, training covered topics such as “Know Before You Owe Mortgage Disclosure Rules,” “Unfair or Deceptive Acts or Practices,” CRA performance evaluations, deposits, the Flood Disaster Protection Act, the MLA, the Servicemembers Civil Relief Act, and fair lending and fair credit rules and practices.

Bank Secrecy Act/Anti-Money Laundering
Examinations of BSA/AML and Office of Foreign Assets Control (OFAC) compliance programs are OCC supervisory priorities. The BSA and OFAC sanctions help prevent the financial system from being exploited for criminal activity and terrorist financing. In 2017, the OCC

  • conducted examinations of banks’ BSA/AML and OFAC compliance programs, and provided guidance to banks in this challenging area, to ensure that banks report required transactions and comply with U.S. laws.
  • participated as an active member of the U.S. delegation to the Financial Action Task Force, an intergovernmental body that sets international AML standards for safeguarding the international financial system.
  • served on the AML Expert Group of the Basel Committee on Banking Supervision, enabling the OCC to collaborate with other bank supervisors from around the globe and promote consistent supervisory expectations.
  • contributed to the oversight committee of the Financial Stability Board’s Correspondent Banking Coordination Group as the group implements its four-point action plan to assess and address the decline in correspondent banking globally.
  • conducted a foreign bank supervisor AML school to help international counterparts strengthen their national AML supervisory frameworks to meet international standards.

Minority Depository Institutions

The OCC actively promotes collaboration among community banks, particularly among minority- and women-owned banks. In 2017, the OCC held roundtables and participated in the national minority depository institution (MDI) conference to bring smaller organizations together with larger financial institutions to identify where they can collaborate and create mutually beneficial relationships. Participants brought enthusiasm and entrepreneurial spirit, leading to several concrete initiatives, such as loan participations with midsize banks and the use of larger banks’ automated teller machine networks.

Minority Depository Institution Advisory Committee

The Minority Depository Institution Advisory Committee held a meeting in June 2017 to provide advice to the OCC on meeting the goals of section 308 of the Financial Institutions Reform, Recovery, and Enforcement Act. MDIs “are an important segment of the federal banking system,” said Acting Comptroller Noreika during the event.

The OCC added new members to its MDI Advisory Committee in 2017. This committee advises the OCC on maintaining the health and viability of MDIs. The committee provides perspective on the business environment affecting MDIs, their customers, and the communities they serve.

The OCC’s Annual Report on the Preservation and Promotion of Minority-Owned National Banks and Federal Savings Associations, published in December 2016, covers these efforts in greater detail.