Supervisors on Supervision

“The Federal Banking System holds more than $14 trillion in assets and has more than $60 trillion under its fiduciary and custody control. With all that money, you would think that the most of risks facing the banking system would be financial. 

But, as our most recent Semiannual Risk Perspective points out, three of the four top risks facing banks are not financial at all, they involve strategic, operational, and compliance risks. 

These are the risks that tend to challenge bankers and require a great deal of examiner attention. We dedicate a significant amount of human resources and have an entire function within our organization identifying, assessing, and sharing our perspectives on these risk with the industry so they can sharpen their risk management and operate more soundly.”

“RegTech holds great promise for supplementing the training, judgment, and expertise of bank examiners and supervisors. The best RegTech eliminates burden of data entry and retrieval, minimizes risk of human error, and helps identify patterns and indicators that may go undetected by the human eye. 

At the OCC, we are undergoing just such a transformation as we modernize and integrate the toolset we use to manage and administer our bank supervision process. Rather than replace human beings, we want tools that make examiners super capable, because we still have not found a greater substitute for the curious, skeptical human mind.”

“There’s no doubt about it. Compliance burdens, particularly those involving BSA/AML, are burdensome and costly. More importantly, I’m not convinced they are as effective as they need to be to prevent the kind of misdeeds or illicit activity that they were intended to catch. 

Some of that can be addressed through better policy and greater coordination, and some of that can be fixed by allowing banks greater flexibility to share data and information and to explore new technologies that alleviates burdens while giving the good guys what they need to catch the bad guys. 

Today, we have a high-definition view of what happens within a financial institution, but we need greater technology to assess what is occurring in the gaps and exchanges in between. Emerging technologies hold great promise to shine a light on these shadows.”

“A healthy risk culture is critical to the safe and sound operation of a bank and that culture starts at the top. The OCC’s heightened standards for large banks make it clear that executives are responsible for fostering a healthy risk culture. It’s something examiners are trained to look for, and it something the agency discusses with the executive teams and directors of the institutions it supervises at every opportunity.”