WASHINGTON — The Office of the Comptroller of the Currency is planning to ask for public feedback on a proposal to roll back the Volcker Rule, which prohibits banks from proprietary trading and other speculative activities, the agency's director said Wednesday.
“We are going to, whether with others or by ourselves, push forward and seek public input on what can be done” to roll back the rule, the acting comptroller of the currency, Keith Noreika, said after a speech at the Exchequer Club luncheon addressing his agency’s fintech charter.
“My idea is a very simple one: issuing an advance notice of proposed rulemaking [to ask] five very basic questions. … What's right with the rule, what's wrong, what would you change, how would you change it and do you have any data to support that.”
Noreika expressed irritation at what he sees as other regulators dragging their feet in tackling the reform of the Dodd-Frank rule.
“Almost everyone agrees something needs to be done,” he said. “Even Elizabeth Warren told me something needed to be done with it. And yet nothing gets done with it.”
Still, the acting comptroller acknowledged that to modify the Volcker Rule, the OCC has to work with the other four agencies that implement it — the Federal Reserve, Federal Deposit Insurance Corp., Commodity Futures Trading Commission and the Securities and Exchange Commission.
“A rulemaking has to be done by all five agencies,” he said. “If we move alone, it will be more on just a solicitation of public comments.”
After his speech, Noreika also sent another volley to Consumer Financial Protection Bureau Director Richard Cordray over the agency’s rule banning mandatory arbitration clauses.
“While Richard Cordray's looking at a straw, I'm looking at the camel's back,” he said. “What I need to do to fulfill my safety and soundness obligations" is "to look at how that potential exposure to our regulated institutions would fare in combination with all the other potential exposures.”
In a letter to Cordray, Noreika had suggested that the arbitration rule could have detrimental effects on the safety and soundness of the financial system. He expounded more on that.
“What are the types of events that could cause your bank to fail?” he said. “It's usually not the normal step you think of. It's the idiosyncratic event, such as a self-identified litigation event, that could lead to that.”
Noreika continued to criticize the FDIC for its assessment of de novo charter applications, which he believes in the case of national banks or thrifts should be handled unilaterally by the OCC.
“Since 2001, we’ve had 14 organizers of national banks that we’ve approved for a charter that have not gotten an answer, a yes or a no, from the FDIC,” said Noreika, a former banking lawyer at Covington & Burling. “To me that’s unconscionable, that they spend all this money to organize a bank to go through two regulatory processes — and they can’t even get a no out of them that they could go to court and challenge.”
He added, “You wonder if that’s not intentionally done to avoid any scrutiny.”
In response to a question about whether he might allow Google or PayPal to obtain a bank charter, Noreika suggested that the separation of banking and commerce, a core principle of banking law, should be re-examined.
“Ours is the only country that has this strict separation of banking and commerce,” he said. “It's historic, I understand it," but "it's not the best thing to put all your eggs in one basket.”