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Wednesday, July 6, 2016

Lawmakers Request Investigation of OCC’s Role in ‘Derisking’

Several Republican members of the House Financial Services Committee have raised concerns about the OCC’s role in encouraging derisking – a practice that involves a bank terminating business or correspondent relationships to avoid regulatory scrutiny. The lawmakers called on the Treasury Department's inspector general to examine OCC’s Bank Secrecy Act and anti-money laundering supervisory practices to determine the extent to which OCC staff have caused banks to derisk their customers.

The lawmakers said:
Financial institutions have made clear to us that this ‘derisking’ trend is very real, and is at least in part the result of actions taken by that OCC’s regulatory supervisory, examination, or other staff to influence a bank’s decision to exit a line of business or to terminate a banking relationship. It is our understanding that OCC staff has made clear to banks that while the institution is on notice with respect to a given correspondent or customer and that – while the decision is ultimately the bank’s – the bank will suffer supervisory or other consequences should anything go wrong with respect to that correspondent or customer.

Lawmakers also expressed concerns that increasing supervisory expectations surrounding risk evaluation could lead to a greater compliance burden, and that the increased regulatory pressure has materially increased the cost of account opening.

Read the letter.

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