On May 15, 2024, Acting Comptroller Michael J. Hsu testified on the OCC’s priorities before the Committee on Financial Services of the U.S. House of Representatives and provided an update regarding the Agency’s initiatives. In his testimony, Mr. Hsu discussed the OCC’s work to guard against complacency, adapt to digitalization, manage climate-related financial risk, and promote fairness in banking.
Hsu’s written testimony provided an overview of the state of the federal banking system, an update on the OCC’s work regarding the agency’s priorities and a description of recent key regulatory developments. Highlights of Hsu’s testimony include the following:
State of the Federal Banking system. The overall condition of the federal banking system is sound. OCC-supervised banks in aggregate continue to have strong levels of regulatory capital and sufficient liquidity buffers, though risks from commercial real estate (CRE) and interest rate exposure warrant attention.
Update on Agency Priorities
Guarding Against Complacency. Hsu urges banks and supervisors to remain on guard against complacency. According to Hsu, the OCC’s Bank Supervision Operating Plan for 2024 highlights asset liability management, credit risk and allowance for credit losses, cybersecurity, operational risk, and consumer compliance risk as key areas of focus.
Promoting Fairness. Since the OCC’s heightened attention on overdrafts began, the overdraft fees charged by OCC-regulated banks in aggregate have fallen over 40 percent. According to Hsu, all OCC-supervised large banks have stopped assessing authorize positive, settle negative fees or insufficient funds fees and most have discontinued collecting sustained overdraft fees.
Adapting to Digitalization. The OCC, Federal Reserve, and FDIC published a third-party risk management guide for community banks with examples of innovative approaches to conducting due diligence and assessing new fintech companies.
Managing Climate-Related Financial Risks. Consistent with the OCC’s safety and soundness mandate, the agency has continued to be engaged with the large banks it supervises to better understand their climate-related financial risk management capabilities and their efforts to identify, manage and control these risks.
Other Regulatory Initiatives. Hsu also provided updates on other regulatory initiatives in partnership with other federal regulators. These initiatives include revisions to Capital Rules for Large Banks, the status of the CRA Final Rule, business combinations under the Bank Merger Act, and its latest proposal regarding incentive compensation.
The OCC’s press release, including the links to Hsu’s oral and written testimonies can be found here.