Comptroller outlines priorities, with CRA, AML/BSA reworking at the top

Modernizing the regulatory approach to community reinvestment and making anti-money laundering compliance more efficient are among the priorities for the federal regulator of national banks, he told a House panel Wednesday.

In prepared testimony, Comptroller of the Currency Joseph Otting also told the House Financial Services Committee that encouraging banks to meet consumers’ short-term, small-dollar credit needs, simplifying regulatory capital requirements, and reducing regulatory burden related to compliance with the Volcker Rule were also at the top of his priority list.

“As Comptroller, my short-term priorities have focused on initiatives to help banks promote job creation and economic opportunity while continuing to operate in a safe, sound, and fair manner,” he told the committee.

Regarding modernizing the agency’s approach to enforcing Community Reinvestment Act (CRA) requirements, Otting said his agency (with the other federal banking agencies) is considering an Advanced Notice of Proposed Rulemaking (ANPR) to solicit public comment about modernizing the CRA regulatory framework.

He said that framework should: expand and provide clarity regarding the bank activities that receive CRA consideration (such as small business, student and – in some cases – small-dollar loans); revisit the concept of assessment areas (by broadening to include all service areas rather than “only narrow geographies defined by branches and deposit-taking automated tellers”); develop a metrics-driven approach to evaluating CRA performance using “clear thresholds” outlining what banks need to do to achieve a certain CRA rating. That would, he said, “allow stakeholders to understand how a bank is working to meet the credit needs of its community, provide a more objective base for examiner ratings, and allow regulators to report on aggregate activity to show a bank’s overall performance.”

Otting said the ANPR will seek comments on all ways to modernize CRA, including modest changes to the existing CRA framework and “more transformational changes.” “It also will seek feedback on allowing community banks to retain a more traditional approach based on their business models,” he said.

In the other comments, Otting told the committee:

  • The OCC’s May bulletin encouraging banks to offer responsible short-term, small-dollar installment loans has been well received (citing a Pew Charitable Trust comment urging other regulators to follow his agency’s lead), and that the OCC is working with Congress to encourage the banking sector to offer additional short-term, small-dollar lending products to meet consumer needs.
  • Federal banking agencies have identified several areas to address in reworking Bank Secrecy Act/anti-money laundering (BSA/AML) laws and regulations, which they presented to the Treasury Department and its Financial Crimes Enforcement Network (FinCEN) last month. Among those areas: allowing regulators to schedule and scope BSA/AML exams on a risk basis and identifying ways to conduct associated exams more efficiently; considering changes to thresholds for mandatory reporting of Suspicious Activity Reports (SARs) and Currency Transaction Reports (CTRs) and simplifying reporting; providing feedback to banks so they understand how SARs and other BSA report filings are used and can provide the most useful information; use of technology to reduce reporting burden and provide “more effective access and information to law enforcement and national security personnel.”
  • Changes made under the recently enacted Economic Growth, Regulatory Relief and Consumer Protection Act (S.2155) requiring regulators to make changes to the calculation of the supplementary leverage ratio will need to take into consideration “whether the proposed recalibration of the enhanced supplementary leverage ratio remains appropriate, or whether additional fine tuning will be necessary.”
  • For those entities that remain subject to the Volcker Rule (after S.2155 reduced its scope), “the OCC is committed to adding clarity and reducing unnecessary burden, as appropriate.”

Testimony of Comptroller Joseph Otting before House Financial Services Committee (June 13)

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