The OCC Senior Deputy Comptroller Jennifer Kelly, in a recent interview with the ABA, offered the following comments concerning the on-going integration of the OTS into the OCC that warrant further comment.
“We also conducted a series of examinations at both national banks and federal savings associations that were staffed with a combination of examiners from the two agencies earlier this year to help us prepare for the integration.”
According to unofficial reports, this joint endeavor resulted in significant differences in what ratings were to be issued for the institutions examined. Typically where the OCC examiners opinions were consulted, the suggested ratings for an OTS institution were lower than those where OTS personnel had the final say. This is to be expected as the OCC has an approach that is less tolerant of component deficiencies in compliance, as opposed to the OTS emphasis on overall and comprehensive conformity to the regulations. Seeing the forest for the trees approach…or not.
“We do not anticipate any changes in the compliance examination experience for our community banks. As discussed in our thrift outreach sessions and similar to OTS, the OCC integrates consumer compliance work into the safety and soundness examination and issues a single report of examination.”
The changes will be anything but ordinary. Specifically for small and medium-size institutions as concerning the Risk Assessment process, the changes will be huge. Moreover, the Consumer Compliance portion of an examination can no longer rest upon it’s isolated standing but will now be mingled with the Safety and Soundness exam, being bruised collectively by the deficiencies in capital and credit standards greatly increased by our current declining economic conditions. Single report examination thriving like a family who all eat dinner together…or not.
“The Portfolio Manager (PM) for a bank is the examiner who is assigned primary responsibility for the ongoing supervision of that institution… Between exams, the PM monitors performance trends and tracks progress on any Matters Requiring Attention and compliance with outstanding enforcement actions. The PM will touch base with bank management at least quarterly and is the “go-to” person for any questions that a banker or director has between examinations.”
“Ongoing Supervision” takes on new meaning for former OTS institutions. For those Compliance departments used to an annual or even 18 month examination cycle with little to no examiner contact in the interim, those were the good old days. Expect quarterly communication with the OCC, the absence of outstanding report issues notwithstanding. Rather than the OCC Portfolio Manager (PM) being the “go-to” person for interim questions, rest assured the PM will be your “hide-from” person as they investigate and solicit from management what new problems are developing for OCC focus and attention. Moreover, have a vacant office available for occupancy by an OCC representative who may become your onsite neighbor year-round. Donuts optional.
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