WASHINGTON — In his first speech as comptroller of the currency, Thomas Curry touted the benefits of the national charter and the local perspective and expertise of OCC examiners.
The comments, made Tuesday in remarks to a small business lending summit in Washington, come as more community banks and thrifts are converting to state charters amid increased regulatory costs and a perceived one-size-fits-all approach at the OCC.
A former state regulator and member of the Federal Deposit Insurance Corp. board, Curry said he has always been impressed with the professionalism and "local character" of the OCC's community bank supervision.
"Most of our examiners work from one of the more than 60 offices the OCC maintains around the country, and they clearly know those local markets as well as anyone," he said. "Local banks and thrifts are in the best position to make credit decisions about the small businesses in their communities, and we won't try to substitute our judgment for that of the bank, nor will we discourage banks and thrifts from making creditworthy loans to small businesses."
Curry was confirmed by the Senate on March 29 and sworn in as the 30th comptroller on April 9 after a months-long stalemate over financial regulatory nominees.
A relatively quiet member of the FDIC board, industry observers have been eager for Curry to take office and reveal more of his views on issues facing national banks — particularly, federal preemption. Although he steered clear of that controversial topic, he tried to combat the perception that the OCC is focused only on large and mid-sized banks.
"It is true that the OCC supervises the largest banks in the country, but most of our resources — including the preponderant share of our supervision staff — are devoted to community banks and thrifts," he said. "In fact, 87% of the banks and thrifts we supervise have less than $1 billion in assets."
Many small banks have converted to state charters in the wake of the Dodd-Frank Act, in part because of a feeling from some that the reform law gutted federal preemption and that the OCC is primarily concerned about the largest institutions.
Asked about the uptick in charter conversions after his speech, Curry acknowledged that his comments aimed to reassure small banks that the agency is attentive to their issues.
"The point's worth making that the OCC is a community bank regulator, and certainly is, I think, a premier regulator of community banks as well as large banks," he said. "I think part of our strength of our nation's financial system is the fact that we have a very dynamic dual-banking system, and that there's a healthy tension, that having a strong national banking system benefits everyone."
Curry said the OCC was also "very serious" about addressing complaints from small banks about overzealous examiners, much of which requires reinforcing policy messages at the highest levels.
"Examiners do a difficult job," he said after the speech. "They're in the thick of things. They have to make significant decisions. We need to provide them — from Washington, the comptroller's office and the district offices — with the important direction they need to do the job right."
Curry argued that the OCC's supervision of community banks also benefits small businesses.
Although such institutions are not the largest source of funding for small businesses, Curry said their success depends heavily on the success of small businesses. Community banks with less than $1 billion of assets provided nearly four out of every 10 dollars that small businesses received last year, or 38% of all small business loans, he said.
Small institutions will have a tough time growing without strong loan demand from small companies, Curry said.
"At the OCC, we are concerned with both sides of this equation, and we will continue to support small business lending by providing resources to banks and thrifts that want to serve this sector and through balanced supervision that is aimed at keeping national banks and thrifts safe and sound, and capable of serving their communities," he said.
Small business loan demand remains weak — a recent report from the National Association of Small Businesses that found only 3% of small business owners who said credit access was their top problem — but many small banks are looking for opportunities to extend credit as the economy improves, he said.
Bank profitability is improving steadily, while at the same time small businesses are showing signs of life.
"The story for small national banks and federal thrifts parallels that of small business generally — they are recovering more slowly than large institutions," he said. "Nonetheless, the vast majority of national banks and federal thrifts have the capacity to respond to an increase in loan demand from small business."
In the meantime, Curry said the OCC and the other federal banking agencies have encouraged banks to make loans to creditworthy borrowers. They issued a statement in early 2010 encouraging prudent small business lending, which reiterated that examiners should take a balanced approach to assessing banks' underwriting and risk management practices, he said.
He said the OCC would also continue to support banks that participate in other small business lending programs, including the Small Business Administration's 504 loan program, which was temporarily expanded to allow more participants last year; the Small Business Investment Companies, or SBIC, program, which allows banks to invest equity capital into such companies that in turn provide financing to small business entrepreneurs; and the Community Reinvestment Act, which often provides consideration for providing small business loans, investments, or technical assistance.
Supporting these programs is crucial because of the important role they play in helping community banks, he said.
"The OCC has been deeply concerned, as have I, with the challenges that community institutions face today," he said. "Without getting too deeply into the weeds, let me say that community banks and thrifts are dealing with new laws, new regulations, and new accounting requirements that each impose their own separate set of challenges. In addition, as we come out of the recession, community institutions are continuing to deal with problem assets, while struggling at the same time to find creditworthy customers who want to borrow."