Office of the Comptroller of the Currency (OCC)
Acting Comptroller Hsu provided updates and elaborated on what the OCC sees as key long-term threats to trust in banking, including digitalization, climate-related risks, inequality, and complacency. For each of these threats, the OCC’s priorities, include:
- Adapting to Digitalization
- Taking a “careful and cautious” approach to crypto-related activities, including requiring banks to obtain supervisory non-objection before engaging in certain crypto-related activities (FRB and FDIC has similar requirements).
- Subdividing bank-fintech arrangements into cohorts with similar safety and soundness risk profiles and attributes to clarify focus on risks and risk management expectations.
- Understanding how bank and fintech business models are reconciled in partnerships and the impacts to consumers, competition, compliance, and the overall industry.
- Incorporating digitalization into the agency’s five-year strategic plan.
- Managing Climate-related Risks
- Determining next steps, in coordination with the FRB and FDIC, regarding principles for climate-related financial risk management for large banks; imperatives include: 1) coordinating and harmonizing across jurisdictions (OCC believes convergence among domestic and international regulators is achievable in the near- to medium-term), and 2) operationalizing scenario analyses and prioritizing diverse approaches to such efforts over “one-size-fits-all” stress tests.
- Engaging with state trade associations and community banks regarding supervisory and regulatory actions related to climate-related risk management.
- Establishing a new Office of Climate Risk with direct reporting responsibility to the Acting Comptroller.
- Addressing Inequality
- Working with FRB and FDIC to move forward on the CRA proposal.
- Encouraging banks to reform overdraft programs.
- Focusing on compliance with fair lending laws.
- Reducing structural barriers to financial inclusion, including through multiple workstreams under the Project REACh initiative: 1) affordable homeownership, 2) inclusion for “credit invisibles”, 3) revitalization of minority depository institutions, and 4) access to capital for small and minority-owned businesses.
- Guarding against Complacency
- Recommending boards and senior management focus on both novel, complex, long-term risks, as well as basic, shorter-term risks, such as those associated with the current rate outlook and mixed market signals impacting credit risk.
- Engaging with FRB, FDIC, and DOJ on review of the bank merger framework, with particular focus on merger impacts to communities, concentration risks, potential for firms to become “too big to manage,” and financial stability concerns.