Amber Van Til, who leads IBA’s government relation team, and I had the privilege last week to attend a meeting in Chicago hosted by the Office of the Comptroller of the Currency (OCC) for bank trade association staff of the central division. Under the leadership of Bert Otto, deputy comptroller of the Central District, the OCC for many years has been reaching out to the industry through its trade associations. These meetings offer candid discussions of the issues faced by both the regulatory community and the financial institutions that they regulate. The conversations go a long way toward making bank examinations more efficient and meaningful to both parties.
While both parties would agree that, at times, these meetings have become a bit acrimonious, at this meeting both sides came away with steps to take to smooth out the process. One topic that prompted lively discussion was the examination of third-party service providers by the OCC and other prudential regulators. To the extent that these third-party relationships, such as core data processers, are critical to the bank, the bank is required to perform and provide to its examination team evidence that adequate due diligence has been and continues to be performed on an ongoing basis. We learned, though, that while the OCC performs examinations of these third-party entities, it may report its findings only to current users. What about a bank that is looking at a data processing company that the OCC has found deficiencies with? OCC cannot contact that bank and disclose the results of its findings. The prudent action of the bank, then, is to contact its primary regulator and discuss the change in relationship it is contemplating. While the primary regulator may not disclose its findings, if it suggests more due diligence, the bank definitely should do more due diligence. Certainly the bank would want to visit with current clients to determine the adequacy of the third-party provider.
One of the OCC representatives present was Carrie Moore, director of congressional liaison. A veteran of Washington, D.C., Carrie was forthcoming about the issues that OCC has flagged as needing immediate attention to help community banks. While the list is not exhaustive, bear in mind that, as a government agency, OCC responds to inquiries, rather than initiates ideas for legislation. Carrie listed three issues that OCC anticipates will draw attention early in the next Congress: (1) provide higher cap for an elongated examination schedule for highly rated banks of less than $750 million in assets; (2) exempt from the Volcker Rule all banks with less than $10 billion in assets; and (3) provide to thrift-chartered institutions the same powers that national banks currently have. The banking industry has a long list of regulatory cleanup to pursue in the next Congressional session, and it is encouraging that OCC is in agreement on most of those items.
Bert Otto has been a friend for the many years that our careers have overlapped. He has 42 years of experience with the OCC, has led the Chicago office for over 15 years and will be retiring at year-end. Phil Gerbick, who serves as senior thrift adviser for the OCC Central District, also will be retiring at the end of the year, after more than 40 years of service to OCC and thrift regulators. I thank these two gentlemen for their lengthy service to the banking industry, and I wish them well in this new phase of life.
- S. Joe DeHaven