Otting touts OCC to foreign banks seeking U.S. presence

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Foreign banks seeking a U.S. presence should consider licensing options with the Office of the Comptroller of the Currency rather than applying at the state level, the head of the federal regulator said Wednesday.

Speaking at an international conference in Tokyo, Comptroller Joseph Otting said foreign institutions have a more streamlined option with the OCC versus having to deal with multiple state regulators.

“In a large banking company that can mean licensing in five to 10 states, resulting in five to 10 different entities and regulators," Otting said in prepared remarks. "That adds complexity and operating costs and, in my view as a banker, may not be the most efficient approach to conducting banking in the United States.

"While it may make sense for some foreign banks, other banks could benefit from operating under a single regulatory framework with one prudential regulator — the OCC.”

Otting's remarks come as the OCC and state regulators have frequently butted heads over chartering issues. After the Japan-based Bank of Tokyo Mitsubishi UFJ was able to convert its state-regulated branches to a national charter, the bank sued the New York Department of Financial Services to suspend its oversight by the state. But the state regulator challenged the suit.

The OCC and state regulators are also embroiled in a fight over chartering for a different segment of the financial industry: fintech firms. The Conference of State Bank Supervisors and New York State Department of Financial Services recently revived legal challenges to the OCC's new special-purpose charter for fintech companies.

Fintech firms currently have to get licensed in each state; the OCC charter would be the first federal path to becoming a national bank.

Otting said the OCC is just a "choice" for foreign banks.

“It is important to note, however, that a national bank charter is only one option among many for companies engaged in the business of banking,” he said. “Other options include pursuing state banking charters, appropriate business licenses, and partnerships with other federal or state financial institutions.”

But he argued that the OCC might be a more “efficient” option among U.S. regulators for foreign banks.

“In considering that choice, banks should be aware that the OCC is well positioned and qualified to provide effective and efficient supervision of federal branches of foreign banks operating in the United States because of its experience supervising the largest, most internationally active banks in the country,” Otting said.

“In many cases, there are supervisory efficiencies gained by consolidating the supervision of branches of foreign banks with the supervision of the national bank subsidiary of the parent company, which the OCC already supervises," he said. "The result is more complete, more efficient, and, importantly, more thorough regulation of the institution.”

Otting’s comments drew a rebuke from the head of the New York State Department of Financial Services, who suggested that the OCC chief was going too far in trying to attract foreign firms.

“No regulator should seek to entice institutions to engage in regulatory arbitrage in return for light supervision and enforcement, and no law-abiding institution would accept such an offer for some perceived short-term benefit,” NYDFS Superintendent Maria Vullo said in an emailed statement. “The states safely and soundly regulate banking activities while the federal government works to misguidedly dismantle financial services regulation and scale back consumer protections.”

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