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.