August 4, 2009
OCC Supports Regulatory Reform, but Raises Some Concerns
WASHINGTON — Comptroller of the Currency John C. Dugan told the Senate Banking Committee today that the OCC supports many elements of the Administration’s regulatory reform proposal, including the establishment of a council of financial regulators to identify and monitor systemic risk. However, he expressed concern about some aspects of the plan, including weaknesses in the proposal for a Consumer Financial Protection Agency (CFPA).
"It makes sense to consolidate all consumer protection rulewriting in a single agency, with the rules applying to all financial providers of a product, both bank and nonbank," he said in testimony. "But we believe the rules must be uniform, and that banking supervisors must have meaningful input into formulating them. Unfortunately, the proposed CFPA falls short on both counts."
The rules would not be uniform because states could adopt different laws and regulations, and national bank preemption would be repealed, Mr. Dugan said.
"This repeal of the uniform federal standards option is a radical change that will make it far more difficult and costly for national banks to provide financial services to consumers in different states having different rules — and these costs will ultimately be borne by the consumer," the Comptroller said. "The change will also undermine the national banking charter and the dual banking system that have served us very well for nearly 150 years, in which national banks operate under uniform federal rules, and states are free to experiment with different rules for the banks they charter."
Mr. Dugan added that the rules do not afford meaningful input from banking supervisors, even on real safety and soundness issues, and that it would be a mistake to let the CFPA take examination and enforcement responsibilities away from the banking agencies.
In addition, the Comptroller said that while he supports making the Federal Reserve the consolidated supervisor of systemically important firms, the Fed should not be allowed to override the primary banking supervisor on standards, examination, and enforcement applicable to banks. Such power, he said, "would fundamentally undermine the authority and accountability of the banking supervisor and unwisely extend the role of the Federal Reserve."
The Comptroller supported proposals to merge the OTS into the OCC with a phaseout of the thrift charter. Mr. Dugan added further regulatory consolidation could bring significant potential benefits, but would carry potential costs as well, especially if the Fed were to be removed from holding company regulation of systemically important firms.
In addition, the Comptroller supported Administration proposals to provide enhanced authority to resolve systemically important firms, and to impose more stringent capital and liquidity requirements on such firms.