Featured Product

    GAO Concludes OCC Could Better Address Risk of Regulatory Capture

    February 25, 2019

    U.S. GAO published a report presenting results of its assessment of the ways to reduce the risk of regulatory capture at OCC, a U.S. agency that supervises over 1,300 financial institutions with assets under supervision totaling USD 12 trillion. In its review on the regulatory capture in financial regulation at OCC, GAO identified certain weaknesses and, therefore, made nine recommendations to OCC.

    The report examined the extent to which OCC has policies that encourage transparency and accountability in the large bank supervision process; address employees’ conflicts of interest that could threaten their independence; and promote an agency-wide focus on supervisory independence and mitigating the risk of capture. GAO reviewed OCC policies, analyzed examination work papers, and interviewed supervisory staff. GAO also analyzed the conflict-of-interest data as well as the enterprise risk management framework of OCC. 

    The recommendations to OCC are related to improving the documentation of its supervision process, checking for conflicts of interest, periodically assessing the ethics program, and expanding its approach to addressing the risk of capture across the agency, among others. The report states the following:

    • OCC has some policies that encourage transparency and accountability in its large bank supervision processes; however, weaknesses in documentation requirements may make large bank supervision more vulnerable to regulatory capture. Maintaining a complete and transparent record of decision making and important communication with banks could improve OCC’s ability to mitigate capture-based decisions.
    • OCC also has some policies to mitigate conflicts of interest, but implementation is hindered by issues related to collection and use of data and lack of program assessments. Improving data collection and assessing policies, controls, and guidance that identify and address conflicts of interest could help OCC ensure that its ethics program is operating effectively.
    • OCC leadership has taken some steps to demonstrate support for supervisory independence, but its approach to mitigating regulatory capture is narrow. For example, OCC only considers two factors when assessing the risk of capture: the tone of its media coverage and the extent to which examination staff rotate among banks. OCC does not analyze other relevant factors, such as employee movement to and from industry or its supervision practices, which can impact this risk. Without expanding its approach to addressing the risk of regulatory capture, OCC may be missing opportunities to identify other ways in which this enterprise-wide risk may affect the agency.

    OCC agreed with one recommendation, disagreed with five, and neither agreed nor disagreed with three of the recommendations. GAO maintains that the recommendations are valid. OCC agreed with the  recommendation to revise instructions for conducting examination work paper reviews and communicate the revisions to employees. OCC stated that it is in the process of updating the instructions and plans to disseminate them to employees in 2019. These actions, if fully implemented, would address this GAO recommendation. Appendix III of the report presents the letter that contains response of OCC to the GAO recommendations.


    Related Links

    Keywords: Americas, US, Banking, Banking Supervision, Regulatory Capture, Risk Management, GAO

    Related Articles
    News

    EC Adopts Financial Reporting Changes Arising from Benchmark Reforms

    EC published Regulation 2021/25 that addresses amendments related to the financial reporting consequences of replacement of the existing interest rate benchmarks with alternative reference rates.

    January 14, 2021 WebPage Regulatory News
    News

    BIS Bulletin Examines Key Elements of Policy Response to Cyber Risk

    BIS published a bulletin, or a note, that examines the cyber threat landscape in the context of the pandemic and discusses policies to reduce risks to financial stability.

    January 14, 2021 WebPage Regulatory News
    News

    HMT Updates List of Post-Brexit Equivalence Decisions in UK

    HM Treasury, also known as HMT, has updated the table containing the list of the equivalence decisions that came into effect in UK at the end of the transition period of its withdrawal from EU.

    January 14, 2021 WebPage Regulatory News
    News

    EBA Issues Erratum for Technical Package on Reporting Framework 3.0

    EBA published an erratum for technical package on phase 1 of the reporting framework 3.0.

    January 14, 2021 WebPage Regulatory News
    News

    APRA Publishes FAQ on Measurement of Credit Risk Weighted Assets

    APRA updated a frequently asked question (FAQ), for authorized deposit-taking institutions, on the measurement of credit risk weighted assets.

    January 14, 2021 WebPage Regulatory News
    News

    EBA Publishes Risk Dashboard for Third Quarter of 2020

    EBA published the quarterly risk dashboard, along with the results of the Risk Assessment Questionnaire survey among 60 banks and 15 market analysts.

    January 13, 2021 WebPage Regulatory News
    News

    ECB Analysis Shows Privacy as Biggest Concern in Use of Digital Euro

    ECB concluded the public consultation on the introduction of a digital euro in EU.

    January 13, 2021 WebPage Regulatory News
    News

    ECB Finalizes Guide on Supervisory Approach to Bank Consolidation

    ECB published a guide that sets out the supervisory approach to consolidation in the banking sector.

    January 12, 2021 WebPage Regulatory News
    News

    SRB Chair Outlines Work Priorities for 2021

    The SRB Chair Elke König published an article setting out work priorities for 2021.

    January 11, 2021 WebPage Regulatory News
    News

    FDIC Selects Companies to Compete in Final Phase of Tech Sprint

    FDIC has selected 11 technology companies—including BearingPoint, Fed Reporter, Inc, and S&P Global Market Intelligence, LLC—for inclusion in the third and final phase of the rapid prototyping competition.

    January 11, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6417