Bank Prudential Regulation & Regulatory Capital
US Comptroller of the Currency Discusses the Condition of the US Federal Banking System
On September 15, 2016, Comptroller of the Currency Thomas J. Curry addressed how the US federal banking system has progressed since the Great Recession and the 2008 financial crisis, the strength of US banks today and the need for continued vigilance to manage risks. Among other things, the Comptroller discussed leverage ratios and their role as an additional line of defense, or backstop, to the risk-based capital measures. Curry criticized the proposals of some to "water down" the ratios by manipulating what is included or excluded from consideration and stressed the need for clear definitions that accurately and transparently capture the leverage of regulated banks. Curry argued that "weakening the ratio through special exclusions only undermines our original intent and weakens the protection against excessive leverage." He further noted that while some wish to exclude certain assets from measures of leverage on the grounds that it could affect certain business lines' profitability, "the essence of assessing a bank's leverage is about comparing its equity to its assets, and carving out various assets would cut against the very meaning of leverage."
Comptroller Curry's full remarks are available at: http://www.occ.gov/news-issuances/speeches/2016/pub-speech-2016-113.pdf.
US Office of the Comptroller of the Currency Releases Bank Supervision Operating Plan for Fiscal Year 2017
On September 14, 2016, the US Office of the Comptroller of the Currency released its bank supervision operating plan for fiscal year (FY) 2017. The plan sets forth the foundation for policy initiatives and for supervisory strategies applicable to individual banks. OCC staff members will use this plan to guide their supervisory priorities, planning and resource allocations.
Of note, the agency indicated that it will focus on Bank Secrecy Act/anti-money laundering compliance management in 2017. Additional supervisory strategies for FY 2017 will focus on: (i) commercial and retail loan underwriting; (ii) business model sustainability and viability; (iii) operational resiliency; and (iv) change management processes to address new regulatory requirements.
The OCC will provide periodic updates about supervisory priorities through the Semiannual Risk Perspective in the spring and fall of 2017, and with a mid-cycle operating plan status report in the third quarter of FY 2017.
The OCC's Fiscal Year 2017 Operating Plan is available at: http://www.occ.gov/news-issuances/news-releases/2016/nr-occ-2016-112a.pdf.
US Office of the Comptroller of the Currency Proposes Framework for Receiverships for Uninsured Federally Chartered National Banks
On September 13, 2016, the OCC issued a proposed rule setting forth a framework for placing uninsured national banks regulated by the OCC into receivership. While the National Bank Act and Federal Deposit Insurance Act specify the Federal Deposit Insurance Corporation as receiver for insured banks and savings associations, the law grants the Comptroller of the Currency broad authority to choose a receiver for uninsured national banks. The proposal would not apply to federal savings associations, all of which are insured, or to uninsured US branch offices of foreign banks.
The proposed rule describes: (i) the appointment of a receiver and required federal notice; (ii) the process for submitting claims against the receivership; (iii) the order of priorities for payment of administrative expenses and claims; (iv) the powers and duties of the receiver; (v) the payment of dividends on claims; (vi) the sources of funds for payments and claims; and (vii) the status of fiduciary and custodial assets and accounts.
While the OCC has not appointed a receiver for an uninsured national bank in many years, the agency believes that clarifying the framework, process and authority promotes the orderly resolution of such institutions if required and contributes to the broader stability of the federal banking system.
All uninsured national banks are currently trust banks. However, the OCC noted that it retains discretion to grant new charters for uninsured banks, and the OCC specifically stated that an uninsured federal bank charter may be an appropriate entity for delivering banking procedures in a new way in light of technological innovations in financial services.
The deadline to submit comments on the proposed rule is November 14, 2016.
The proposed rule is available at: http://www.occ.gov/news-issuances/news-releases/2016/nr-occ-2016-110a.pdf.
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