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The terrorist attacks of September 11, 2001, brought a renewed focus on the federal banking system’s international exposures. The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 enacted sweeping reforms that toughened provisions to the Bank Secrecy Act and added additional compliance responsibilities to bank supervision. OCC guidance helped examiners and bankers highlight the importance of managing risks associated with foreign third-party service providers.
Yet behind the scenes, trouble was brewing again. In the low interest rate environment, lenders were offering subprime and nontraditional loans, which relied less on strict underwriting standards.
Making the situation more difficult for examiners was the unbundling of traditional banking services that masked new, financially engineered assets. This new environment created a challenging situation for examiners to understand how these complicated obligations affected a bank’s risk exposures.
OCC examiners sounded public warnings about these developments and pointed to rising concentrations of real estate lending in several spaces of the banking environment. Despite these warnings, the real estate market collapsed, crippling the economy from 2007 through 2008.
In response to this financial crisis, the OCC played an important role to help stabilize the banking system, restore the flow of credit, help victims of the financial crisis, and rebuild trust in the federal banking system by enhancing the quality of supervision.
Examiners analyzed bank applications for the Troubled Asset Relief Program and developed a better understanding of the difficulty many banks faced in accessing liquid funds during the crisis. They also improved their insight into the complex financial instruments banks held, many hidden in off-balance-sheet vehicles that clouded an institution’s exposures to risk.
In July 2010 President Barack Obama signed into law the Dodd–Frank Wall Street Reform and Consumer Protection Act, which was intended to better protect consumers and taxpayers in response to the financial activities that caused the 2007–2008 crisis.
Our financial system only works—our market is only free—when there are clear rules and basic safeguards that prevent abuse, that check excess, that ensure that it is more profitable to play by the rules than to game the system. — President Barack Obama, July 21, 2010
Our financial system only works—our market is only free—when there are clear rules and basic safeguards that prevent abuse, that check excess, that ensure that it is more profitable to play by the rules than to game the system.
Dodd–Frank transferred most functions of the OTS to the OCC. This added responsibility for the supervision of federal savings associations, or “thrifts,” to the agency, but also brought with it the talent and expertise of former OTS employees to the OCC.
Through this transfer, the OCC adopted the OTS’s advisory committees focusing on minority depository institutions (MDI) and mutual savings associations.
These committees enabled the OCC to gain additional perspectives on the unique challenges and needs these important institutions face.
For Hub Thompson, Assistant Deputy Comptroller for Community Bank Supervision in Fort Worth, Texas, the reshaped focus on MDIs was rewarding. “They’ve struggled for talent, capital, and continuity,” he said. “It hurts to close them because you feel you’ve lost an opportunity to serve their communities. It’s a real positive on the agency that we’ve tried to find them support, expertise, and business opportunities.”
To assist consumers adversely affected by the financial crisis, the OCC promoted constructive workout arrangements between lenders and homeowners. Throughout the market turmoil, OCC examiners encouraged national banks to work with delinquent borrowers to restructure problem loans, giving them more time and flexibility to resolve their obligations.
