In his opening Preamble to this report [See the Preamble to the 2023 Compendium], US Acting Comptroller of the Currency Michael Hsu questions whether some firms show signs of having grown “too big to manage” (or “TBTM”). Hsu argues that there are limits to the manageability of organizations. “I have seen enterprises become so big and complex,” he writes, “that control failures, risk management breakdowns, and negative surprises occur too frequently — not because of weak management, but because of the sheer size and complexity of the organization.”
Going forward, these TBTM risks, Hsu argues, “will become an imperative for banks and bank regulators.” And not only because of the potential risk of harm to bank stakeholders, but also because a failure to supervise such risks successfully damages regulators through impaired credibility. In late May, the OCC announced revisions to its policies and procedures manual on bank enforcement actions to reflect a “consideration of actions against banks that exhibit or fail to correct persistent weaknesses.”1 These may include requirements that a bank hold additional capital in reserve; restrictions on its growth, activities, or dividend payments; and, if weaknesses in response to prior enforcement actions persist, the OCC may consider requiring the bank to simplify or reduce its operations, to include forced divestitures or market exits.2
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