Speaking before the U.S. Senate Committee on Banking, Housing, and Urban Affairs earlier in the week, Comptroller of the Currency Thomas J. Curry said the overall financial condition of banks has improved since the passage of the Dodd-Frank Reform Act four years ago—but he believes that supervisors need to "remain vigilant."
Curry stated that the Dodd-Frank rulemakings for which his agency has sole responsibility and he praised the progress of implementing the interagency Dodd-Frank rulemakings that have yet to be completed, saying he believed many of them will be finalized in the near term.
"Despite the improving strength and health of banks, however, I am keenly aware of the need for supervisors to remain vigilant," Curry told the committee.
Regarding heightened supervision, OCC finalized a set of guidelines earlier in September that raised risk management standards for large banks to ensure they remain financially stable and avoid a repeat of the financial crisis of 2008 that resulted in the passing of the Dodd-Frank Act in 2010.
"Requiring higher supervisory standards for the largest and most complex banks we oversee is consistent with the Dodd Frank Act’s broad objective of strengthening the stability of the financial system," Curry said in his address. "These heightened standards address the need for comprehensive and effective risk management; an engaged board of directors that exercises independent judgment; a more robust audit function; talent development, recruitment and succession planning; and a compensation structure that does not encourage inappropriate risk taking."
Curry added that OCC is holding itself to the same high supervisory standards it applies to large banks, and he cited as evidence of this the findings of a team hired last year to assess OCC's supervision of large and mid-sized banks. The team identified several areas in which OCC was performing well, but also some areas in which the team felt could be improved, and Curry said OCC had embraced the team's discoveries and subsequent suggestions.
"One key improvement includes expanding our lead expert program which will allow us to better compare the operations of the institutions we regulate to identify trends, best practices and weaknesses," Curry said. "Another change will improve our ability to identify systemic risk by enhancing our risk monitoring processes and reporting. That fits squarely with the semi-annual public reports by our National Risk Committee."
OCC has also included community banks in its campaign to heighten supervision in the financial industry, Curry said. A lending limits rule that provides banks with easier options to measure credit exposures is an example of OCC regulation intended to remove unnecessary burden from community banks.