The Need to Stay Focused on Compliance Supervision
Excerpts from Remarks by John C. Dugan, Comptroller of the Currency at the July 7 Compliance Conference in Orlando, FL
www.occ.treas.gov
John C. Dugan, Comptroller of the Currency, who has been on the job for about three years, addressed his chief concerns to attendees at the 2008 OCC compliance conference in Orlando, FL.
"My fundamental issue to you today," he said, "is this: we simply cannot take our eyes off compliance while we address safety and soundness. We know how to deal with credit issues, and we will work our way through these very difficult problems. What I donít want, though, is to finish dealing with the industryís safety and soundness issues only to find that weíve allowed significant compliance problems to develop in their place."
The comptroller offered this point: "If we continue to do a good, consistent job with our compliance supervision, then as the economy turns down and banks across the board are dealing with credit problems, they should be much less likely to make the kinds of compliance mistakes that harm consumers and distract bankers from their other significant challenges."
He continued, ..."since we are in midst of a downturn, Iím sure the question many of you are asking is, "what happens to compliance supervision? Will compliance work be ignored as we increase our focus on the increased risks to safety and soundness?" The answer is no - Öwe simply canít afford to put compliance supervision on hold. As safety and soundness issues come to the fore, it is imperative that we guard against compliance complacency."
Dugan talked about some compliance issues that are likely to come to the fore in the coming year. He acknowledged that the current Congress has been more focused on compliance issues ñ especially consumer protection issues ñ than previous Congresses. He sees that trend continuing, regardless of the outcome of the Presidential election, and even if credit and safety and soundness issues become more pronounced.
Dugan said one priority compliance issue in the next year will be fair lending. There will continue to be close scrutiny of the way that banks make loans, especially in light of the subprime problem. One particular area he said bears watching is loan workouts. With so many mortgages having problems, ìbanks need to be sure that similarly situated borrowers who default or become delinquent are treated similarly, with no variations based on prohibited factors like race or gender.
Regarding consumer protection issues, Dugan said, "I do think the Federal Reserve could very well issue significant new final rules regarding subprime mortgages and credit cards" in the area of unfair and deceptive practices.
Another area of focus, Dugan said, may well be CRA, as it relates to subprime loans. He said one concern he has is that "some lenders may have concluded from the subprime crisis that they should retreat once and for all from the subprime market. That would be more than unfortunate... There are ways for banks to make good loans in that market that will fulfill their CRA obligations."
In the areas of compliance with the Bank Secrecy Act and other anti-money laundering laws. Dugan said the amount of examiner time and resources devoted to BSA compliance have enabled the agency to meet the challenge of fixing "BSA compliance supervision without needless increases in regulatory burden."
He said that banks, after complaining loudly about raising the BSA supervision bar and receiving uneven supervision, "have come to a much better understanding of what is expected of them through the widespread implementation of the interagency manual I think we have demonstrated to our bankers that the bar, once raised, is not getting higher. And I think they've gotten used to the consistent level of supervision that we now conduct."
In conclusion, Dugan repeated that... "Compliance supervision is important. Itís important to bank customers, and itís important to our national security. Itís important for the safety and soundness of the banks we supervise, and itís important to the OCCís standing as a bank regulator. We need to give compliance our very best efforts."
For details, visit www.occ.gov/ftp/release/2008-76a.pdf.
