November 20, 2017 / 5:04 AM / in a year

U.S. bank examiners to show lighter touch, OCC's Noreika says

NEW YORK (Reuters) - A top U.S. bank regulator has been working to ensure that examiners on the ground have a lighter touch with institutions they scrutinize, but change will take more time, acting Comptroller of the Currency Keith Noreika said in an interview on Friday.

Bankers at institutions regulated by the Office of the Comptroller of the Currency (OCC) have said they have not experienced much change from examiners, who inspect loan-level data on balance sheets as well as firm-wide risk taking and cultural issues.

“I’ve spent a lot of time in the field and we are starting to get a sense that examiners are listening,” said Noreika, who last week said he plans to resign from his role after Congress confirms President Donald Trump’s choice for a permanent comptroller.

The OCC is “at the front end of this,” he added. “I think we’ll see the fruits of that later.”

Bank examiners can wield great power to crack down on lenders. During the Obama administration they toughened up on big banks regarding issues like leveraged lending and exposure to energy- and auto-loan defaults.

However, they were also faulted during the 2007-2009 financial crisis for not doing much to prevent the U.S. housing market’s collapse and also largely missed problems brewing inside Wells Fargo & Co (WFC.N) before the bank became enveloped in a sales practices scandal over a year ago.

Trump has promised to cut regulatory red tape across corporate America, including at big banks. Noreika has been aggressive in pursuing that agenda, particularly as a temporary appointee.

For instance, he opened up the Volcker rule – a controversial post-crisis reform that was widely disliked on Wall Street – for public comment, the first step before changing the regulation. Noreika told Reuters he expects a proposal for Volcker revisions to be ready by spring.

Even so, bankers say they have not felt much difference on the ground when it comes to examiners. Those regulated by the OCC include JPMorgan Chase & Co (JPM.N), Bank of America Corp (BAC.N), Citigroup Inc (C.N), Morgan Stanley (MS.N) and Wells, as well as a large number of regional and community banks across the country.

Earlier this month, Mitsubishi UFJ Financial Group Inc (MUFG) (8306.T) opted to switch to a federal banking charter that allows it to be overseen by the OCC rather than the state charter it previously had.

Though based in Japan, MUFG has a U.S. retail banking operation and significant stake in Morgan Stanley. Its decision to change regulators was widely seen as a move from a tough state regulator in New York to an easier-going OCC.

In Noreika’s view, examiners must be empowered to use their own judgment rather than simply enforcing rules handed down by lawmakers and bureaucrats in Washington.

“It has the effect of undermining bank regulators’ ability to do their job,” he said.

Reporting by Olivia Oran in New York; Additional reporting by Pete Schroeder in Washington; Editing by Lauren Tara LaCapra and Cynthia Osterman

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