GAO chides OCC for not keeping Basel records 'confidential'

• Key Insight: Prudential regulators have different policies regarding the retention of confidential international policy work, though the GAO report is limited to the Office of the Comptroller of the Currency because it lacks a specific policy for Basel committee materials. 
• What's at Stake: The GAO found discrepancies in the handling of public disclosure related to the materials, though agencies received just three Freedom of Information Act requests over a six-year period. 
• Expert Quote: "If the Basel Committee or its members did not protect the data's confidentiality, then banks might not voluntarily provide the data." — GAO report

A government watchdog is warning the Office of the Comptroller of the Currency about retaining records and maintaining confidentiality related to the Basel Committee on Banking Supervision, the global committee of central bankers and international regulators.
On Thursday, the Government Accountability Office issued a report warning the OCC to clarify which documents related to the Basel committee are considered federal records under the Federal Records Act. The act establishes agencies' responsibilities for the management and preservation of records.

The GAO also warned agency staffers against the public release of sensitive information that is confidential, asserting that employees of prudential regulators could be charged with civil or criminal penalties or face other disciplinary actions for releasing information. The Basel committee is the main standard-setting body for global bank regulators, with 45 member countries, including the United Kingdom, the European Union and China. 

Last year, House Financial Services Committee Chairman French Hill asked the GAO to examine the policies of U.S. banking regulators on records retention, public disclosure and confidentiality related to the Basel committee. 

The OCC was singled out from other regulators on the committee because it does not have a policy to cover the Basel committee's work, including the confidentiality of documents. 

"The Basel Committee expects members to treat Committee work as confidential," the report states. "Internal discussions and the analyses on which they are based should be kept confidential."

The GAO warned agency staff about disclosing confidential information. 

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The watchdog agency said that regulators "can take disciplinary or other actions against staff for breaching the Basel Committee's confidentiality expectations. Agency staff must protect confidential supervisory and other sensitive information, which includes Committee information. The officials said that agency disciplinary policies, adverse action procedures, and standards of ethical conduct apply. In addition, civil or criminal penalties could be applied to staff who disclose certain confidential information, according to agency officials."

The government watchdog recommends that the OCC revise its records retention policy or issue guidance clarifying which documents should be treated as official records. The OCC agreed with the recommendations.

The report comes on the heels of the Trump administration's massive deregulation push, with regulators looking to scale back the so-called Basel III Endgame proposal. The Basel III proposal unveiled in July 2023 would have increased bank capital requirements by roughly 19%, though a revised proposal issued in 2024 would have raised bank capital more modestly. Instead, the forthcoming proposal is expected to be significantly changed, with a new plan expected in the first quarter of this year. The Basel III Endgame was supposed to strengthen bank capital requirements for institutions with over $100 billion in assets, focusing on risk-based capital, operational risk and credit risk. 

The Basel III Endgame proposals issued under the Biden administration faced stiff opposition and lobbying from the banking industry.

To get to the bottom of whether regulators are retaining records, the GAO said it interviewed officials from the Federal Deposit Insurance Corp., Federal Reserve Board System, Federal Reserve Bank of New York and the OCC. It also reviewed documents, confidentiality agreements and record-retention policies, including the handling of Freedom of Information Act requests.

"The officials said if the Basel Committee or its members did not protect the data's confidentiality, then banks might not voluntarily provide the data," according to the report. "In such a case, the Committee would lack the data needed to assess the impact of its standards."

Interestingly, the Basel committee imposes no penalties for violating confidentiality expectations, though it could take informal action such as restricting a member's access to information.

The report also noted the discrepancy between regulators. 

For example, the Federal Reserve Board's policy expressly covers Basel and other international organizations. Meanwhile, the FDIC has a policy that does not expressly cover the Basel committee's work, but officials say "the policy applies, and they have a procedure to document BCBS work," the report said. 

The Federal Reserve received just two related FOIA requests from 2019 to 2024 and responded that "the information was confidential and exempt from disclosure," the report states. The FDIC received one FOIA request and provided the information. 

The Basel committee describes itself as playing a "crucial role" in reducing risks in the global banking system by promoting consistent, high-quality supervision and addressing gaps in international oversight. The goal of the committee is for banks worldwide to have adequate regulatory standards for capital and liquidity to withstand financial stress. However, the standards themselves are not legally binding, but serve as blueprints for countries to use as a basis for their own conforming regulations.