Category Archives:OCC Updates

OCC Host Workshop in Dallas

The Office of the Comptroller of the Currency will host two workshops in Dallas at the Wyndham Dallas Suites – Park Central on October 20-21,  2015 for directors of national community banks and federal savings associations. The workshop is limited to the first 35 registrants and cost $99 to attend.

The Compliance Risk workshop on October 20 combines lectures, discussion, and exercises on the critical elements of an effective compliance risk management program. The workshop also focuses on major compliance risks and critical regulations. Topics of discussion include the Bank Secrecy Act, Anti-Money Laundering and Qualified Mortgage Regulations. The instructors will also touch on the new Truth-in-Lending (TILA) and the Real Estate Settlement Procedures Act of 1974 (RESPA) Integrated Disclosures Rule, also known as TRID.

Revised and updated for 2015, the Credit Risk workshop on October 21 focuses on credit risk within the loan portfolio, such as identifying trends and recognizing problems. The workshop also covers the roles of the board and management, how to stay informed of changes in credit risk, and how to effect change.

 The workshops are taught by experienced OCC staff and are two of the 35 offered nationwide to enhance and expand the skills of national community bank and federal savings association directors. For information, including a complete list of available workshops, or to register for a workshop, visit or call (240) 485-1700.

Risks & Opportunities Facing Financial Services

Comptroller of the Currency Thomas J. Curry recently discussed risks and opportunities facing financial services during remarks before the New England Council in Boston, MA. During his speech, the Comptroller commented on interest rate risk, compliance risk, cybersecurity, and the role collaboration can play in mitigating these risks. He also discussed opportunities to improve business operations as well as service to customers.

More specifically, Curry emphasized that the inevitable rise in interest rates could greatly affect loan quality, particularly loans that were not carefully underwritten to begin with, and that ”loans that are typically refinanced, such as leveraged loans,” would be particularly severely affected. The final and “perhaps the foremost risk facing banks today,” according to Curry, is cyber threats. Curry outlined the agency’s efforts to curtail cyber intrusion in the banking industry, highlighting the June 30 release of its Semiannual Risk Assessment . Curry noted lastly that information-sharing is just as important as self-assessment and supervisory oversight and he strongly recommend that financial institutions of all sizes participate in the Financial Services Information Sharing and Analysis Center, a non-profit information-sharing forum established by financial services industry participants to facilitate the sharing of physical and cyber threat and vulnerability information. Collaboration among banks of all sizes and non-bank providers, Curry stated, can be a “game-changer” in more ways than one.”

Read Curry’s remarks

OCC Updates Historic Tax Credit Report

The Office of the Comptroller of the Currency (OCC) has released an updated edition of its 2008 Community Developments Insights report entitled Historic Tax Credits: Bringing New Life to Older Communities. This Insights report provides an overview of Historic Rehabilitation Tax Credits, why they might be of interest to other banks, and associated risks or regulatory considerations.

For more than 35 years, the federal Historic Tax Credit program has helped revitalize communities by encouraging the flow of $109 billion in private funds to facilitate the rehabilitation of historic buildings. These investments have facilitated the redevelopment of hundreds of thousands of residential and commercial properties, including a substantial number of low- and moderate-income housing rental units.

This updated Insights report:

  • discusses the methods used by banks and federal savings associations (FSA) to structure transactions and use the tax credits effectively;
  • highlights regulatory changes since the previous Historic Tax Credits Insights was published in 2008;
  • includes a discussion on IRS Revenue Procedure 2014-12;
  • discusses the public welfare investment authority, under which national banks and FSAs may make Historic Tax Credit investments;
  • outlines how the Historic Tax Credit activities of banks and FSAs are evaluated for Community Reinvestment Act purposes.


Regulatory Capital Rule's FAQs Released

Financial Institutions are accountable for complex risk-based regulatory capital rules. Some may use internal risk management models approved by the relevant regulator while others must use standardized rules set out in the regulations. On April 6th, The Federal Reserve, Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation (the agencies), issued FAQs for clarification for regulated institutions about the agencies’ regulatory capital rule. The FAQ topics included, but are not limited to:

  • The definition of capital,
  • High-volatility commercial real estate (HVCRE) exposures,
  • Real estate and off-balance-sheet exposures,
  • Equity exposures to investment funds,
  • Qualifying central counterparty, and
  • Credit valuation adjustment.

Reserve Banks are asked to distribute the FAQs to the state member banks, bank holding companies, and relevant savings and loan holding companies in their districts and to appropriate supervision staff.  As the agencies anticipate issuing additional FAQs in response to questions from institutions, the Federal Reserve will periodically update the FAQ document.

OCC Releases Paper on Community Bank Collaboration

Today, the Office of the Comptroller of the Currency’s (OCC) released a paper entitled ” An Opportunity for Community Banks:Working Together Collaboratively.” In the paper the OCC’s express it’s views for collaborative efforts by community banks to pool or share resources to reduce costs and leverage specialized expertise. In the paper the OCC discusses ways for community banks to work together with their peers to lower expenses, obtain compliance, and compare products and services. The OCC believes, “as diverse as community banks are, they share the same commitment to supporting the
communities they serve. With this in mind, the OCC sees an opportunity for community
banks to share resources and expertise to the mutual benefit of all involved.”

OCC Highlights Key Risks Facing Banking System

The Office of the Comptroller of Currency has released their semiannual report highlighting key risk areas affecting the federal banking system. The report presents data in five main areas: the operating environment; bank condition; key risk issues; the range of practice in interest rate risk modeling; and regulatory actions. It focuses on issues that pose threats to the safety and soundness of those financial institutions regulated by the OCC and is intended as a resource to the industry, examiners, and the public, reflecting data as of June 30, 2014. 

Specifically regarding community and midsize banks, the report identifies key risks facing community and midsize banks including:

  • High strategic risk as banks adapt their business models to respond to sluggish economic growth, low interest rates, and intense competitive pressures.
  • Properly planning for management succession and retention of key staff.
  • Erosion of underwriting standards in various loan products.
  • Expansion into loan products that require specialized risk management processes and skills, such as participations in syndicated leveraged loans.
  • Increasing exposure to IRR at banks with concentrations in long-term assets (including mortgagebacked securities [MBS] and loans) and uncertainties about the behavior of NMDs once interest rates increase.
  • Appropriate oversight of third parties vendors.
  • Increasing volume and sophistication of cyberthreats.
  • Increasing BSA/AML risk because of higher-risk services and customer relationships
  • Ensuring effective compliance management systems and staffing

The outlook for community and midsize banks includes

  • Moderate to strong loan growth, stabilizing NIM, and stronger capital ratios.
  • Suppressed mortgage-banking revenue and lower gain-on-sale margins
  • A continued search for higher-yielding assets and profitable strategic business niches.
  • Expansion into new products and services


Agencies Propose Rule for Loans in Flood Areas

On October 30, The Office of the Comptroller of the Currency (OCC), Board of Governors of the Federal Reserve System (Board), Federal Deposit Insurance Corporation (FDIC), the Farm Credit Administration (FCA), and the National Credit Union Administration (NCUA) (collectively, the Agencies) issued a proposed rule to amend their regulations regarding loans located in special flood hazard areas to implement certain provisions of the Homeowner Flood Insurance Affordability Act of 2014. Specifically, the proposed rule would establish requirements in connection with the escrow of flood insurance payments;  provide certain borrowers with the option to escrow flood insurance premiums and fees; and eliminate the HFIAA requirement “to purchase flood insurance for a structure that is part of a residential property located in a special flood hazard area if that structure is detached from the primary residential structure and does not also serve as a residence.” Comments on the proposed rule are due by December 29, 2014.

OCC Issues Merchant Processing Booklet

On August 20, the Office of the Comptroller of Currency (OCC) released an updated booklet providing guidance to examiners and bankers on assessing and managing the risks associated with merchant processing activities. The booklet replaces the earlier version issued in December 2001. The booklet addresses a variety of topics including:

  • Selection of third-party organizations and due diligence.
  • Technology service providers.
  • On-site inspections, audits, and attestation engagements, including the “Statement on Standards for Attestation Engagement” (SSAE 16) and the “International Standard on Assurance Engagements” (ISAE 3402).
  • Data security standards in the payment card industry for merchants and processors.
  • member alert to control high-risk merchants (MATCH) list.
  • Bank Secrecy Act/Anti-Money Laundering compliance programs and appropriate policies, procedures, and processes to monitor and identify unusual activity.
  • Appropriate capital for merchant processing activities.

Updated Booklet.

OCC's Remarks to State Bank Supervisors

At the Conference of State Bank Supervisors, which was held on May 14 in Chicago, IL, Comptroller of the Currency Thomas Curry urged state regulators to, among other things, avoid regulatory capture and ensure balanced supervision of nonbanks and banks. Mr. Curry stated that “The OCC also has focused its attention on community bank supervision. It is important to get it right with respect to both the rules of the road and supervision. Too many community banks failed during the crisis. The Material Loss Reviews or post mortems from the crisis share a common thread of failed banks that operated with flawed business plans, excessive real estate concentrations and inadequate capital for the level of risk.”

He later stated in his remarks, “Regulatory capture is a real threat” to federal and state banking agencies and the system more broadly. Regulators should never employ chartering authority to compete for “market share.” He also cautioned about the potential rise of the “shadow banking system”—the shift of assets from regulated depository institutions to less-regulated, non-depository institutions. He specifically identified the transfer of mortgage servicing rights as an example of that shift of assets, which “could carry with it the seeds for the next financial crisis if we do not act quickly and effectively.” He called on state regulators to make nonbank supervision, including with regard to mortgage servicing, a top priority.

Higher Expectations for Community Banks In Extraordinary Circumstances

On April 10, 2014, Comptroller of the Currency Thomas J. Curry presented remarks concerning risk management and related corporate governance issues before the American Bankers Association Risk Management Forum.  Comptroller Curry focused his presentation on the OCC’s “heightened expectations” for risk management and corporate governance.  He stated that the OCC’s “heightened expectations” program applies exclusively to large, complex banks, i.e., those with consolidated total assets of $50 billion or more (“Large Banks”).”

In his remarks, Comptroller Curry responded to community banks’ concerns that the heightened expectation program would only apply to a bank with less than $50 billion in consolidated assets “in extraordinary circumstances,” i.e., if the OCC determined that the bank’s operations were highly complex or present a heightened risk.  News outlets have recently reported that the OCC is reviewing the public comments on its proposed heightened expectation program and is expected to tweak it by clarifying that the guidelines are not intended to apply to smaller banks and on providing some assurance to bank directors that, although they are expected to oversee their bank’s compliance performance, they are not required by the OCC to “ensure” their bank’s compliance with applicable regulations.