OCC Pushing to Simplify Big Banks
By Joe Adler

Since the financial crisis, regulators have pushed megabanks to simplify their legal operations in order to make them easier to seize and dismantle if they later become troubled. But now regulators are working to force the largest banks to rethink their legal entity regimes in an effort to improve operational efficiency. Until now, the effort has largely been driven by the Federal Deposit Insurance Corp. and Federal Reserve Board, both of which want banks to become more “resolvable” in an effort to end “too big to fail.” But the Office of the Comptroller of the Currency said last week it was also urging banks to simplify regimes on a supervisory basis and plans to share data about simplification projects with the other banking agencies. “Every now and then you need to kind of clean out the attic. It gets cluttered,” Martin Pfinsgraff, the OCC’s senior deputy comptroller for large-bank supervision, said in an interview. “You need to rethink and reorganize.” The OCC’s involvement in legal entity simplification projects — which was discussed in a March 3 speech by Charles Taylor, the deputy comptroller for capital and regulatory policy — has turned a few heads. The agency has incorporated legal entity simplification into its “heightened expectations” program, the OCC’s broad series of steps to beef up supervision of the largest banks. (Taylor was addressing a conference for the Institute of International Bankers.) In a note to clients, analyst Karen Shaw Petrou said her “takeaway” from Taylor’s speech was the agency may be pushing “subsidiarization,” a concept opposed by big banks in which a firm’s operations are all placed in discrete subsidiaries that could be more easily resolved in a failure. Petrou said simplification is needed at megafirms with overly complex structures, but she noted the OCC’s message departs from its past focus on how national bank subsidiaries can “get national banks around lots of state rules and federal restrictions on mixing banking and commerce.