Comptroller Curry Discusses Importance of Effective Supervision Before Clearing House Annual Conference

In prepared remarks delivered on November 30 before The Clearing House Annual Conference in New York City, Comptroller of the Currency Thomas J. Curry discussed lessons from the 2008 financial crisis. Curry noted that he was “often disappointed how quickly some forget the lessons of more recent events, particularly what brought the financial system to the cliff in 2008 and what has put our banks and our economy on much firmer ground since.” His remarks emphasized the value of strong capital, the need for ample liquidity, and the importance of effective supervision.

In discussing capital, Curry noted that since the beginning of 2009, there has been a $700 billion increase in common equity capital. Such levels would allow the 33 largest bank holding companies to be well capitalized and continue lending even under the most severe scenario used by the banking agencies’ stress tests. He cautioned, however, that “[w]eakening the ratio through special exclusions only undermines our original intent and weakens the protection against excessive leverage.” Comptroller Curry similarly noted that the Liquidity Coverage Ratio and the proposed Net Stable Funding Ratio complement each other to push covered banks to hold ready resources to meet short-term cash outflows and to shift to more stable, longer-term funding.

On the subject of supervision, Curry noted the importance of “holistic supervision based on the CAMELS rating system.” He also added that while a periodic reassessment of banking laws and regulations is appropriate, “we must never settle for ‘light-touch’ supervision.” And, in concluding, Curry stressed that community banks and their examiners, in order to “remain strong and healthy,” need to “focus on strategic risk, rising credit risk from stretching for yield while relaxing underwriting standards, expansion of new technologies, and compliance issues.”

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OCC Issues Updated Guidance for Managing Bank Premises and Equipment

On November 29, the OCC announced the release of a revised Bank Premises and Equipment booklet of the Comptroller’s Handbook. The revised booklet, which replaces the booklet of the same title issued in March 1990, applies to examinations of all national banks and federal savings associations engaged in the acquisition, management, and disposal of bank premises and equipment. According to the accompanying OCC Bulletin, the revised booklet incorporates updated statutory and regulatory citations and revised examination procedures since the integration of the Office of Thrift Supervision into the OCC in 2011. The bulletin explains that the booklet also replaces the “Investment in Bank Premises” booklet of the Comptroller’s Licensing Manual and the “Fixed Assets” section of the former Office of Thrift Supervision Examination Handbook.

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FSB Releases Updated Lists of Global Systemically Important Banks and Insurers

On November 21, the Financial Stability Board, in consultation with the Basel Committee on Banking Supervision and national authorities, released its updated 2016 list of G-SIBs and 2016 list of G-SIIs. Each of the new 2016 lists comprise the same banks/insurers as those on their respective 2015 list. The Basel Committee also released the following additional information related to its 2016 G-SIB assessment: (i) a list of all the banks in the assessment sample;  (ii) the denominators of each indicator used to calculate the banks’ scores; (iii) the cutoff score that was used to identify the G-SIBs in the updated list; (iv) the thresholds used to allocate G-SIBs to buckets for the purpose of calculating the specific higher loss absorbency requirements; and (v) links to disclosures of all banks in the assessment sample.

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FDIC Amends FOIA Regulations in Accordance with FOIA Improvement Act

The FDIC published a Notice of an Interim Final Rule and Request for Comment in the November 22 edition of the Federal Register. The new rule amends FDIC regulations in accordance with requirements set forth in the FOIA Improvement Act of 2016. The new rule also codifies changes brought about by prior amendments that had already been incorporated into agency practice. To meet the Act’s statutory deadline, the interim rule was adopted without prior notice and comment and became effective immediately upon publication on November 22. Comments on the interim rule are due on January 23, 2017, after which the FDIC will remove the interim designation.

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Fed Extends Post-Employment Restrictions for Senior Examiners

In a press release on November 18, the Fed announced revised post-employment restrictions that more than double the number of senior staff examiners barred from leaving a Federal Reserve Bank and going right to work for a bank they had supervised. By law, senior bank examiners are prohibited for one year from accepting paid work from a financial institution that they had primary responsibility for examining in their last year of Reserve Bank employment. This post-employment restriction has previously applied only to central points of contacts (CPCs) at firms with more than $10 billion in assets. The revised policy expands this post-employment restriction to deputy CPCs, senior supervisory officers (SSOs), deputy SSOs, enterprise risk officers, and supervisory team leaders, which has the effect of more than doubling the number of senior examiners covered. The policy—which takes effect January 2, 2017—does not apply to senior examiners responsible for multiple unaffiliated banks.

In addition, another new Fed policy prohibits former Fed Bank officers from representing financial institutions and other third parties in matters before the Fed for one year after leaving their Federal Reserve position. This policy takes effect on December 5.

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