CHAPTER CHATTER - October 2, 2013

The following is a reprint of a Wall Street Journal article that came out on September 30th. To be honest, we have no idea what this means exactly. Outside of knowing about the international panel reviewing the agency (discussed below), NTEU has not been provided any specific information. Remarks made by Comptroller Curry to the American Bankers Regulatory Symposium on September 23rd address more specifics:

However, NTEU has not been afforded any pre-decisional involvement on what this means initially for large bank examiners, how this may impact the way they do their job, and whether this can ultimately be applied to midsize and community bank examiners. The article below and the published speech have already prompted a lot of questions to the NTEU.

Without any details at this point, we feel that everyone should be concerned about this. And we encourage anyone who does have concerns to address questions to your team leaders, EICs, and/or ADCs. As you can appreciate, it can be a bit disconcerting to see something 'first' in the Wall Street Journal or any external published venue that may impact the way you do your jobs. If you feel more comfortable running your questions through your Chapter Presidents, go to the Chapter Officer page on this website and contact us directly.

As always, you can direct any feedback (positive or negative) on this or any of the Chapter Chatters to any of your Chapter Presidents.

Bank Examiners to Face Rigorous Reviews

New Program From Comptroller Reflects Criticism of Regulators for Lax Oversight Before and After Financial Crisis By MICHAEL R. CRITTENDEN

WASHINGTON—U.S. bank regulators, criticized for lax oversight in the run-up to the financial crisis, are undergoing tougher scrutiny intended to improve their surveillance of the financial system.

The Office of the Comptroller of the Currency, which polices the nation's biggest banks, is rolling out a program that will subject bank examiners and other personnel to the same level of rigorous review the agency currently puts banks through. Examiners will undergo regular assessments and be held accountable for problems that aren't addressed, Comptroller of the Currency Thomas Curry said last week.

The effort comes as the OCC, stung by criticism over its lax oversight leading into the financial crisis and subsequent blunders such as missing J.P. Morgan Chase & Co.'s "London whale" trading losses, tries to turn itself into a tougher, more muscular regulator. The new program will be paired with a separate initiative allowing regulators from Canada, Singapore and Australia—all of which weathered the financial crisis—to perform their own independent evaluations of the OCC.

A good portion of the new scrutiny is expected to fall on the agency's teams of bank examiners and supervisors since the OCC's primary mission is to regulate national banks. All OCC personnel will now undergo banklike examinations, including being subject to regular reviews by internal OCC auditors. Senior management at the agency will be held accountable for the results, Mr. Curry said in a speech at the American Banker Regulatory Symposium earlier this week, and problems flagged "must be cured—no ifs, ands or buts."

"We can do better. In fact, we not only can do better—we must do better if we are to avoid future financial crises," Mr. Curry said.

The Federal Deposit Insurance Corp. and Federal Reserve have taken similar steps to bolster their own operations and fix weak spots that allowed problems to go undetected in the financial system until it was too late. "I think overall it will make us a stronger agency, give us a chance to have early warnings, identify things on the front end. We want to be the best at what we do," said Larry Hattix, who will be in charge of the agency's new internal-review plan and report directly to Mr. Curry.

For Mr. Curry and the OCC, the new banklike reviews are the latest attempt to change the internal culture and external perception of the agency, which has been a frequent target of criticism from Capitol Hill. The missed "London whale" trades, a troubled mortgage-foreclosure review and mistakes enforcing money-laundering rules have given the OCC a series of black eyes that Mr. Curry has taken steps to address. He has rolled out an eight-part plan aimed at improving the agency's operations and promoted Mr. Hattix, who has been the agency's ombudsman since 2008, to his executive committee.

"It is important. The top-level rule making gets the most attention, but your staff morale, your execution are also very important," said Sheila Bair, the former head of the FDIC who appointed that agency's first chief risk officer two years ago.

"You can pass all the good rules you want, but if they're not enforced properly, it does no good," Ms. Bair added.

Mr. Hattix described the new plan as a second layer of checks and balances that will help officials find areas of improvement and areas where things are working effectively. The agency's many departments will be treated just like a bank being reviewed, said Mr. Hattix, with officials focusing on the areas of the agency's operations that pose the greatest risk.

Putting in place such programs has a long history among the federal regulators and is part of an "evolutionary process aimed at constant improvement," said Eugene Ludwig, the former comptroller of the currency and founder of Promontory Financial Group.

"We're living in a changing environment, with more complex financial instruments, globalization, technological change, and the agency recognizes it has to evolve," Mr. Ludwig said.

Mr. Curry's decision to put such an emphasis on the issue publicly shows how important he thinks it is for his agency, said Wayne Abernathy of the American Bankers Association.

"He was talking internally to the agency. This is him saying 'I'm staking my reputation on this,' " Mr. Abernathy said.

A version of this article appeared September 30, 2013, on page C5 in the U.S. edition of The Wall Street Journal, with the headline: Bank Examiners to Face Rigorous Reviews.