It's A Wonderful Life!

Ah, the old Building and Loan! The nation’s first thrift, Oxford Provident Building Association, was established in 1831 to provide a means to finance the great American dream – homeownership. By the early 1920s there were more than 12,000 savings institutions (known by various names, including savings and loans, building and loans, thrift and loans, thrifts, savings banks, building associations, thrift associations and savings associations). These institutions were established in response to a significant increase in the demand for housing as rural Americans migrated to urban areas in pursuit of the Dream. The Great Depression of the 1930s and the associated housing market crash prompted Congress to establish the Federal Home Loan Bank System, followed by the creation of the Federal Home Loan Bank Board, the predecessor agency to the Office of Thrift Supervision (OTS), and the establishment of the Federal Savings and Loan Insurance Corporation (FSLIC).

Throughout the next several decades, it truly was a wonderful life. Thrifts originated roughly two-thirds of the nation’s mortgage loans. But with the increasing interest rates, and the resulting federal ban on adjustable rate mortgages in the 1970s, thrifts struggled to remain profitable. Rising interest rates continued through the 1980s; the government deregulated the lending and investment powers of thrifts, but profitability struggles led to many thrifts engaging in aggressive and risky lending and investment strategies. Hundreds of thrifts closed or failed, and Congress responded by merging the FSLIC into the Federal Deposit Insurance Corp. (FDIC) and creating the OTS to supervise, charter and regulate the thrift industry.

Bedford Falls or Pottersville? Responding to the 2008 financial crisis, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act. Title III of the Act abolished the OTS, authorizing the Office of the Comptroller of the Currency (OCC) to assume responsibility for examination, supervision, and regulation of federal savings associations (state savings Associations are transferred to the FDIC, and savings association holding companies are transferred to the Federal Reserve) effective July 21, 2011. “Well, whaddya know about that!!!” said George Bailey.

Well, we know:

• Many OTS examiners have transferred onto the OCC examination team. Thrifts can rest assured that upcoming examinations will be jointly staffed with OCC and former OTS examiners, wherever possible.
• The July 31, 2011 Thrift Assessment is deferred to September 30, 2011, and is based on June 30 data. Assessments for September 2011 and March 2012 will be calculated under both the OTS and the OCC schedules and institutions will pay the lesser of the two fees. The September 2012 assessments will be calculated under a single assessment schedule, regardless of charter.
• The Thrift Financial Report (TFR) will be phased out and merged into the FDIC Call Report process beginning with the March 2012 reporting period. In the interim, TFR reporting and data analysts will begin working with the FDIC during the 2011 second quarter reporting period.
• The Uniform Thrift Performance Report (UTPR) will be replaced by the Uniform Bank Performance Report (UBPR) once the Call Report transition is complete.
• The OCC, FDIC, and FRB will identify the OTS regulations that will continue to be enforced and will publish the list in the Federal Register no later than the July 21, 2011 transfer date. Proposed rules and finalized rules not yet in effect will be reviewed and transferred to the appropriate agency, as applicable.
• 2012 examination plans and supervisory strategies for federal savings association will be jointly developed by the OCC and OTS.
• On November 3, 2010, a Deputy Comptroller for Thrift Supervision, reporting to the Senior Deputy Comptroller for Midsize/Community Bank Supervision, was added to the OCC to lead the integration planning, coordinate the network of Senior Thrift Advisors, and act as key advisor to other Deputy Comptrollers on large and problem thrifts.
• The OCC is adding a Senior Advisor for Thrift Supervision in each district officer and in Special Supervision. This position reports to the Deputy Comptroller and serves as a key member of the District’s senior management team.

Clarence! Clarence! Help me, Clarence. Get me back. The situation is not as desperate as it was for poor George Bailey, and Clarence the angel probably won’t step in to help you. But there are some steps you can take in preparation for your transition from the OTS to the OCC:

• Review the OCC’s history, mission, objectives, and strategic plan; familiarize yourself with all that’s available at http://www.occ.treas.gov./
• Become acquainted with the OCC’s current communications publications, including but not limited to: News Releases; Bulletins; Alerts; and Consumer Advisories. Also review historic communications on relevant topics.
• Go through the appropriate Handbooks to gain an understanding of the OCC’s examination philosophy and approach. Invite all departmental managers to review the Handbooks covering their areas of expertise – develop a list of clarifications needed and opportunities for enhancement.
• Once identified, make contact with your institution’s OCC Portfolio Manager. Be sure to inquire about obtaining access to BankNet, the database of resources for National Banks.
• Introduce your Directors and senior management to the resources available (Directors Toolkit and the available workshops) designed to assist them in understanding and executing their roles.
• Network with colleagues from existing National Banks to compare notes.

And remember: Risk management is all about managing change. Applying some of the standard principals you use in managing risk on a day-to-day basis will ensure a smooth transition. And, like George – just think what life would be like at your institution if you had never been born to manage risk. It truly is A Wonderful Life!