Dodd-Frank transferred to the OCC all functions of the OTS relating to federal savings associations on July 21, and the OCC assumed responsibility for the ongoing examination, supervision, and regulation of federal savings associations. From an operational perspective, the integration of the OTS into the OCC has been successfully completed. We have fully integrated OTS staff into all departments of the OCC's organizational structure.
Combined examination teams have begun working on exams at national banks and federal savings associations. Prior to July 21, the OCC communicated extensively with the thrift industry to prepare for this transfer of responsibility from the OTS to the OCC. Since that time, we have continued to participate in a variety of outreach activities to maintain an active dialogue with federal savings associations, including several national teleconferences on supervisory issues of specific interest to them.
We also will continue and expand the former OTS advisory committees on mutual savings associations and minority institutions as venues for important input on the unique challenges facing those institutions. And, as new issues emerge, the OCC will continue to communicate regularly with the thrift industry to clarify our expectations and respond to its concerns.
As I explained in my testimony before this committee in July 2011, the OCC is in the process of undertaking a comprehensive, multiphased review of its regulations, as well as those of the OTS, to eliminate duplication and reduce unnecessary regulatory burden. On July 21, the OCC issued a final rule revising certain OCC rules that are central to internal agency functions and operations to take into account the transfer to the OCC of jurisdiction over federal savings associations. The final rule also conformed the OCC's pre-emption and visitorial powers regulations to the Dodd-Frank Act provisions that became effective on July 21. The OCC also issued an interim final rule, effective on July 21, that republished most OTS regulations in the OCC's chapter of the Code of Federal Regulations and renumbered them accordingly as OCC rules, with nomenclature and other technical amendments to reflect the OCC's responsibilities for federal savings associations. This action consolidates the regulations applicable to national banks and federal savings associations in the regulations of the OCC.
We are now in the process of further integrating and consolidating OCC and republished OTS regulations. We are considering more comprehensive substantive amendments to republished OTS regulations, as well as existing OCC rules, with the continuing objective of reducing duplication and providing consistent treatment, where appropriate, for both national banks and federal savings associations. We expect this process to result in a more streamlined set of regulations that aims to reduce unnecessary regulatory burden. Throughout this process, the OCC is mindful that the federal savings association charter has certain unique statutory attributes that are necessary to preserve. In all instances where revisions are undertaken, we will seek public comment to assist in making the regulations workable and effective for both national banks and federal savings associations.
A similar effort is underway to integrate the more than 1,000 OTS supervisory policies into a consolidated OCC policy framework. The goal is to produce a consistent supervisory approach and integrated policy platform for both national banks and federal savings associations, while recognizing differences anchored in statute. As part of this process, the OCC plans to rescind several hundred OTS documents that are duplicative or obsolete. The OCC will then focus on policy guidance documents that require substantive revision or combination, as well as policy guidance documents that are considered unique to savings associations. Upon completion, this process will result in a more streamlined set of policies for national banks and federal savings associations that should eliminate confusion associated with duplicative or obsolete policy documents.
In the last several months, the OCC has assisted the CFPB in a number of areas related to their operations. We have been providing the CFPB with significant staff and infrastructure support by processing consumer complaints on behalf of the CFPB. We entered into a Memorandum of Understanding with the CFPB under which the OCC's Customer Assistance Group is performing intake, processing, analysis, and resolution of consumer complaints about national banks and federal savings associations with total assets of more than $10 billion. The CFPB is currently handling complaints that concern credit cards offered by these large institutions, and plans call for them to begin handling those relating to mortgage lending and servicing.
In addition, we recently issued a joint policy statement to clarify how the prudential regulators and the CFPB will measure the total assets of an insured depository institution for purposes of determining supervisory and enforcement responsibilities under the Dodd-Frank Act. Under Section 1025 of the Dodd-Frank Act, the CFPB is given primary authority to examine an insured depository institution for compliance with federal consumer financial laws if the institution has total assets greater than $10 billion. The prudential regulators retain exclusive supervisory and enforcement authority for insured depository institutions with total assets of $10 billion or less.
There is much that remains to be done, however. The OCC has established an internal Consumer Issues Steering Committee to act as liaison with the CFPB on the coordination of supervisory and regulatory matters. CISC members have scheduled weekly meetings, and have more frequent informal communications with CFPB staff on examination coordination, information sharing, rulemakings and consumer compliance issues.
One important project concerns the requirements for consultation by the CFPB with prudential regulators in connection with CFPB rulemakings. Under the Dodd-Frank Act, the CFPB has exclusive authority to prescribe regulations administering certain enumerated federal consumer financial laws. With respect to this rulemaking authority, the CFPB is required to consult with the prudential regulators prior to proposing a rule and during the rulemaking process “regarding consistency with prudential, market, or systemic objectives” administered by the prudential regulators. The law states that if, during the consultation process, a prudential regulator provides a written objection to all or any part of a proposed CFPB rule under consideration, the CFPB must describe the objection and how it addressed it in its adopting release. This consultation process is important to ensure meaningful input by prudential supervisors on CFPB regulations. The CFPB currently has in process several rulemakings where interagency coordination and consultation will be critical. These include the “ability to repay” requirements for “qualified mortgages,” which should be carefully coordinated with the “qualified residential mortgage” criteria in the interagency risk retention rulemaking so that the interplay of the two standards is appreciated and unintended consequences do not result.
The OCC and the other prudential regulators are currently working to develop an agreement on a consultation process that will meet these statutory objectives and provide the prudential regulators with reasonable time to effectively review, discuss, and comment on CFPB rulemakings.
Another area of current discussion concerns implementation of the Dodd-Frank Act requirements that the CFPB coordinate its activities with the supervisory activities conducted by the prudential regulators in order to minimize regulatory burden on an institution. Section 1025 requires the CFPB to consult with the prudential regulators regarding respective schedules for examining an institution. Similarly, the CFPB and the prudential regulators are required to conduct their respective examinations simultaneously in an insured depository institution and to share and comment on related draft reports of examination that result from the simultaneous examinations. The law also provides that the regulated institution may opt out of a simultaneous examination by the prudential regulator and the CFPB.
The OCC continues to be an active participant in the activities of the FSOC as it carries out its mission to identify and respond to emerging risks that threaten the financial stability of the U.S., to promote market discipline, and to facilitate coordination and information sharing among the various financial regulators.
Since my last update to this committee in July, the FSOC issued its 2011 Annual Report to Congress, which includes a summary of both the state of the U.S. financial system as a result of the 2007-09 market recession and some of the major forces that will shape the financial system's future development. The report also details the progress of key domestic regulatory reforms resulting from the implementation of the Dodd-Frank Act. In addition, the FSOC has held two formal meetings and convened several conference calls among its members to discuss current market developments. As described in more detail below, formal actions that the FSOC has taken during this period include the publication of an enhanced notice of proposed rulemaking and guidance on the process the FSOC proposes to use for designating systemically important nonbank financial firms for enhanced supervision by the Federal Reserve Board.
Equally important, however, have been the deliberations and information exchanges among agency principals and staff on market and regulatory developments that could have potential systemic risk implications for the U.S. financial sector and broader economy. These discussions have included updates on the agencies' ongoing assessments and analyses of the situation in the European financial markets and their potential ramifications for the U.S. and deliberations on various structural issues confronting the U.S. financial system that were identified in the FSOC's annual report, including money market fund reform, the triparty repo market, and efforts to address and reform the U.S. housing market. Facilitating these types of candid, confidential exchanges of information is, I believe, one of the most critical functions of the FSOC.
John Walsh is the acting comptroller of the currency.
