As President Donald J. Trump continues to make nominations for Cabinet, judicial, and agency posts, curiously little focus has fallen on who will be chosen to head one key financial regulator.
While last week, the confirmation hearings of Supreme Court nominee Neil M. Gorsuch were being live-streamed, and while the fate of the Consumer Financial Protection Bureau (CFPB) and its Director, Richard Cordray, continues to make headlines as the PHH Corp. v. CFPB case unfolds, and the nomination—and ultimate confirmation over vehement Democratic opposition—of Steven T. Mnuchin as Secretary of the Treasury drew attention, the question of who will lead the Office of the Comptroller of the Currency (OCC) remains a mystery.
This question becomes more pressing as the clock ticks toward April 1, when the five-year term of Comptroller Thomas J. Curry expires.
The OCC is officially a bureau of the Treasury Department, but it acts independently and is self-funded. The OCC plays many critical roles in financial regulation, and in the working of financial markets in the US and abroad.
The roles and powers of the OCC—and the Comptroller—include the following:
- Chartering national banks The OCC reviews and approves (or denies) applications to start new (“de novo”) national banks. The other federal banking regulators–the Federal Reserve, FDIC, and CFPB–have similar supervisory authority over banks and persons within their respective jurisdictions, but they do not charter new institutions.
- Examining and supervising national banks OCC bank examiners conduct examinations of every national bank—and for the largest banks, OCC examiners maintain office space at those banks, where they conduct exams onsite on an ongoing basis.
- Approving (or denying) corporate applications The OCC reviews and approves (or denies) applications for transactions involving national banks, such as mergers and acquisitions, other changes in structure, and branching.
- Taking enforcement and other supervisory actions The OCC has broad authority to take supervisory actions, including public enforcement actions, against national banks and certain persons associated with national banks, including individuals, in response to violations of law, unsafe or unsound banking practices, and breaches of fiduciary duty.
- Writing regulations and issuing interpretations While rulemaking authority for most consumer protection and compliance statutes was transferred to the CFPB by the Dodd-Frank Act, the OCC retains authority to write rules for statutes such as the Community Reinvestment Act and flood insurance statutes, and to issue rules and interpretations regarding the powers of national banks, such as pursuant to the National Bank Act.
- Serving on the FDIC Board of Directors The Comptroller serves ex officio as an FDIC Board member.
While the other federal banking regulators possess many of the same powers over banks and persons within their respective jurisdictions, the OCC has some unique functions, and the leader of the OCC has significant power to direct its priorities and focus.
National banks have the benefit of federal preemption that allows them to ignore many state laws. The OCC has some latitude to determine just which state laws those are, and this has been the subject of controversy over the years. The next Comptroller could choose to put his or her own spin on the preemption issue.
The OCC’s authority over large banks is one of the most significant aspects of the agency’s powers. National banks include the largest banks in the US, and some of the largest banks in the world. Large national banks significantly impact individual consumers and global financial markets: they represent the majority of credit card issuers; have a significant share of the residential mortgage lending and servicing markets; and are major players in international financial transactions.
While the CFPB is now the primary consumer compliance regulator for banks above $10 billion, including national banks, the OCC remains the safety and soundness regulator for all national banks.
Comptroller Curry’s term has marked a departure in some ways from the pre-financial-crisis OCC, which was criticized by consumer advocates and others for allowing large banks to act too freely, including through an aggressive preemption stance. As a state regulator, Curry was expected by many to bring a different outlook than previous OCC leadership. The longtime Massachusetts Commissioner of Banks, he was also a member of the FDIC Board of Directors when nominated to be Comptroller of the OCC by President Obama in 2011.
He took office as the financial crisis was yielding numerous supervisory issues for the OCC and other regulators to address. He inherited a troubled independent review of bank foreclosures that he ultimately shut down for lack of success.
Recently, under his leadership, the OCC has also been vocal in its interest in facilitating technological innovation in the banking sector. It has created an Office of Innovation and proposed offering a specialized national bank charter for fintech companies. (As we discussed in an earlier blog post, on March 15 the OCC issued a draft supplement to its licensing manual for public comment; comments are due April 14.)
It is possible that the OCC could be led by an acting Comptroller pending the confirmation of a permanent one, which has happened before. No holdover provision is specified for the Comptroller as it is for certain other appointed positions, so it is not clear that Comptroller Curry could stay on pending the confirmation of his successor. We will continue to monitor developments in this area and, when a nominee is identified, discuss what effect such a nominee could have on the regulatory landscape.