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Monday, March 31, 2014

ABA, Groups: OCC’s ‘Heightened Expectations’ Are Off-Target

The OCC’s “heightened expectations” for large bank risk management and governance are too rigid, prescriptive and counterproductive, ABA and several trade groups said in a comment letter. In January, the OCC proposed a set of enforceable “minimum standards” for a large bank’s risk governance framework and board oversight.

The proposal’s rules-based approach would compartmentalize the bank’s risk framework from its holding company’s, reduce the effectiveness of the “lines of defense” approach and limit effective internal audit reporting, the groups said.

Furthermore, they added, the proposal’s provisions expanding the board role would expose directors to greater liability, make it harder to recruit the best-qualified directors and blur the distinction between oversight and management.

The groups also emphasized that the guidelines should not be applied to banks with under $50 billion in assets except through notice-and-comment rulemaking. The proposal would allow the OCC to apply the standards to banks under that threshold at the agency’s discretion.

Read the letter.

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