The Office of the Comptroller of the Currency continues to revamp how it supervises financial institutions and monitor risks to their safety and soundness. A plan announced this week advances a previously announced strategy to reduce the number of on-site examiners at big banks and reassign top experts to industry-wide risk reviews.

The OCC supervises approximately 1,800 institutions. The large bank supervision program has approximately 620 examiners, the midsize bank program has approximately 130 examiners, and the community bank program has 1,700. The catalyst for rethinking how these examiners are deployed was an external report commissioned by the OCC and released in December 2013. It was prepared by a team of current and former senior supervisory personnel from Australia, Canada, Singapore, and the International Monetary Fund.

The review flagged numerous concerns with the current examination process. Those issues include: a high proportion of examiners are at or near retirement age; a significant number of new rules and policies need to be put in place because of the Dodd-Frank Act, Basel Committee on Bank Supervision, and the Financial Stability Board; and that the OCC must navigate multiple federal and state regulatory agencies with overlapping responsibilities.

The OCC's response maps out how the agency will address these concerns.In addition to shifting on-site examiners to centralized locations and giving them a broader view of the marketplace, the OCC will expand its Large Bank Supervision lead expert program. When fully staffed, the program will increase from 21 to 100 risk specialists.It will also establish a formal rotation program for all examiners to provide them with broader, fresh perspectives. For example, examiners at large banks will be moved to another institution at least once every five years.

The agency will also develop a “risk appetite statement” to provide its staff with “a clear and consistent understanding of what the agency is all about.” It will also formalize an enterprise risk management framework and conduct a benchmarking review of its supervisory framework in comparison to domestic and international peers. The OCC will also develop a process to clarify when strategic supervisory issues (mergers and acquisitions, intervention actions, etc.) need to be escalated to senior agency management.

Also in the works, expanding efforts to retain retirement-eligible staff on a part-time basis as mentors for incoming staff and supplement temporary staff shortages. The OCC will also explore how to better integrate private sector experts into the examination force.

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