Big Bank Chiefs Must Meet Higher Standards, Curry Says
Heads of the biggest U.S. banks are being asked to meet higher conduct standards separate from the Volcker rule and Basel III capital requirements, said Comptroller of the Currency Thomas Curry.
The regulator of national banks said in an interview that his agency is operating by a new “internal written framework” to guide its bank supervisors and the banks’ leaders to insist on the “highest standards” in corporate governance and risk management.
“The performance is not just the gentleman’s C of the college days, but really we expect As, excellence,” Curry said, adding that these are informal expectations directed by the Office of the Comptroller of the Currency’s large-bank supervision arm. “There’s a balance here between the rulebook versus the art and the judgment of supervision, and this falls into the category of supervisory judgment.”
In several speeches since he became comptroller in April, Curry has cautioned lenders about practices such as excessively releasing capital from loss reserves to bolster earnings. In his first speech since the re-election of President Barack Obama, Curry said today at a Clearing House conference in New York that the OCC intends to ensure big banks don’t “sow the seeds of the next crisis.”
“With respect to our large banks, we have raised the bar for what we expect of senior management and independent directors,” Curry told the financial-industry group. “We have been very specific in our conversations about it with management and independent directors.”
Curry, who has focused on risk management in five of his last six speeches, said the OCC won’t accept audits and risk- management that’s “simply satisfactory.”
The OCC will also have higher expectations of bank directors, he said.
“Independent directors must be able to challenge management in a credible way,” and they’re expected to “set a clear direction for their institutions,” Curry said in the speech.
Curry’s agency and other banking regulators recently postponed implementation of the Basel III capital rules that were initially meant to be in place Jan. 1.
“I think we need to get the rules in place as quickly as possible,” Curry told reporters after the speech, declining to be more specific about timing. “We need good rules, but we need to do this quickly. A lot of the uncertainty that we’ve seen is really due to not knowing the rules of the road.”
As for community banks’ request that they be removed from the future capital requirements, Curry pointed out that it was the OCC that inserted a question into the proposed rule asking whether those small banks should be subject to Basel III’s new risk-weighting of assets. He added that “strong capital is important” and the need “transcends all sizes and types of institutions.”
Curry also declined to predict the timing of a final Volcker rule to ban banks’ proprietary trading.
“There’s a lot of work going on behind the scenes,” he said, and the many agencies involved -- including markets regulators -- mean a wide range of views. “We do come from different places. Sometimes that slows things down.”
To contact the reporter on this story: Jesse Hamilton in Washington at firstname.lastname@example.org