OCC Stops Removal Of In-House Examiners: Banks To Benefit?

In a policy reversal by the banking regulator, examiners will continue working at banks they supervise. In a statement to Bloomberg News, the Office of Comptroller of the Currency (OCC) head Joseph Otting said, “Upon review, it is not practical to continue the agency’s efforts to move resident examiners out of on-site locations.”

High cost of independent real estate and the burden examiners will likely face in moving back and forth between government offices and Wall Street banks were cited as the reasons for halting the effort.

Otting commented that other measures such as rotating examiners from bank to bank show that the OCC is serious about stopping ‘regulatory capture.’ He said, “The agency will continue to review its locations and real estate strategy to ensure they support the agency’s mission in the most operationally and cost-effective manner possible.”

For years, the OCC has been intending to move hundreds of in-house examiners who worked at offices of big banks including Bank of America (NYSE:C) , JPMorgan (NYSE:JPM) , Wells Fargo (NYSE:WFC) and Citigroup (NYSE:C) . The primary aim to remove examiners from on-site locations was to prevent them from becoming lenient in scrutinizing banking operations.

Notably, former OCC head Thomas Curry led the efforts to remove in-house supervisors. He intended to leave a small number of examiners on site while moving the others to neutral locations.

In reality, no significant progress seems to have been made on this front. According to the regulator, nearly 65% of the major bank examiners remain on-site. In fact, this number has risen over the last couple of years.

So, though at present banks are not expected to reap any benefits from the change in policy, there are chances that they might gain in the long run. With supervisors remaining on-site, there are chances that they might not report business misconducts and banks may take undue risks.

Also, the plan indicates that banking regulators are gradually trying to lessen Wall Street oversight (one of the big electoral promise made by President Donald Trump) despite not making any real progress on that front.

Of the above-mentioned big banks, JPMorgan, Citigroup and BofA carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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