A NEW NATIONAL-BANK REGULATOR EMERGES
In just his first two days after taking office, Acting Comptroller Brooks set the OCC on a “move fast, break things” trajectory with lasting strategic implications.
It is already clear that Brian Brooks will make a significant difference for as long as he is acting head of the Office of the Comptroller of the Currency (OCC), the U.S. regulator of national banks, federal savings associations, and federal branches and agencies of foreign banks. His first acts were striking – a strong statement of purpose, immediate finalization of a controversial rule expanding the OCC’s interest-rate power and the affirmation of the Administration’s COVID-recovery strategy via a discussion of risks – including increased bank robberies – to banks if masks don’t quickly come off so the country can get back to work.
Although the OCC’s reach is both wide and strong, its power is not unlimited. The Fed’s power over parent companies and the payment system is a significant constraint as is the FDIC’s unilateral authority over which charters get federal deposit insurance. Even so, the OCC makes a material difference not only in the powers of federally-chartered companies – many the largest in the U.S. – but also over the structure of U.S. financial regulation. Near-term actions with both strategic and structural impact are likely to include:
- action attempting to sanction or at the least censure banks for eschewing lending and other services for fossil-fuel companies. Former Comptroller Otting called this redlining and major Trump Administration officials and GOP senators take the same strong view;
- a strong push to create a new special-purpose national charter for digital currency. We think the Fed will be even less willing to provide payment-system access for this charter than for the fintech one, but significant benefits nonetheless remain for this sector following a nod from the OCC;
- a new push to rewrite the electronic-funds transfer rules under banking-agency authority to modernize these increasingly-anachronistic standards; and
- adherence to Treasury on high-profile Administration initiatives. Even if the Fed balks, the OCC may waive rules seen as impeding bank support for key official-lending programs. OCC actions to boost Administration outreach to urban communities, rural areas, or other constituencies could prove largely symbolic but might nonetheless also involve regulatory change. As FSOC steps up work to govern asset management and nonbank lenders, the OCC will also prove a key voice defining Treasury’s thinking and ensuring that banking industries views are heard.
The analytics above are based on in-depth reports provided to FedFin clients.
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