COLORADO SPRINGS — Comptroller Joseph Otting says he plans to use the current era of strong profitability, risk management and high capital within the industry to keep agency costs in check, resulting in lower exam fees for national banks next year.

Speaking at American Banker’s Retail Banking conference, Otting said he’s using his past experience as a banker to “really look hard at our cost structure.”

“We have the most capital, some of the cleanest loan portfolios we’ve had with some of the highest reserves,” Otting said. “We are now reentering a period that harkens back to pre-crisis returns on capital and profitability.”

Comptroller of the Currency Joseph Otting
Otting said the agency should be able to cut costs during times of stability, yet equipped to ask for greater resources when they're needed. Bloomberg News

He said the OCC requires fewer resources than when it was facing a crisis environment, and is aiming to lower exam fees next year.

“We’ve looked hard on our cost structure and this year we’ll be up less than 2% and we’re looking that we can reduce our cost structure to the industry next year,” he said.

The OCC is funded by assessments on national banks, which equaled roughly $1.2 billion last year. Otting’s ambitions extend beyond a one-time cost reduction, however, and into a more fundamental change to how the agency sets fees. He said that the agency can pull back in good times, but ramp up again when a crisis is brewing.

“We are somewhat like firemen where we should be able to run in and ask for resources when the industry is going through stress times, and we should be able to pull back in times like today,” he said.

He added: “When there are crises in the economy and banks’ loan portfolios start to deteriorate, we need to make sure that banks are properly grading and recognizing losses when it’s appropriate. That’s when you come in and spend a lot more money on the credit side.”

During the conference, Otting reiterated his commitment to reforming the Community Reinvestment Act, saying it’s a rare opportunity to reshape the regulations surrounding the law.

“This is the one chance we have to move this forward,” he said. “I have spent time with legislators, consumer groups, bankers, other regulators. There is momentum to fix it. This is the point and time to fix it.”

He also talked more about how regulators can provide additional flexibility to financial institutions when it comes to anti-money-laundering compliance. He said the regulators are working on a report to the Treasury Department’s Financial Crimes Enforcement Network on how the system can be changed.

“We’ve agreed we would come back to them with recommendations on how we would like to offer bank flexibility and some variances on the examination process,” Otting said. “There’s a lot of things we can do to solve this BSA/AML issue without disrupting the intent. It’s kind of gotten to a ‘gotcha’ system. I think we need to step back from that and say what can we do to not put all that onerous responsibility on financial institutions.”

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