The Comptroller of the Currency directs the Office of the Comptroller of the Currency (OCC), which charters, regulates, and supervises all national banks. The office also supervises the federal branches and agencies of foreign banks. Headquartered in Washington, D.C., the OCC has six district offices and an office in London to supervise the international activities of national banks. The four objectives of the Comptroller of the Currency are
• to ensure the safety and soundness of the national BANKING SYSTEM
• to foster COMPETITION by allowing banks to offer new products and services
• to improve the efficiency and effectiveness of OCC supervision, including reducing regulatory burden
• to ensure fair and equal access to financial services for all Americans
In 1861 Secretary of the Treasury Salmon P. Chase recommended the establishment of a system of federally chartered national banks, each of which would have the power to issue standardized national bank notes based on U.S. BONDS held by the bank. In the National Currency Act of 1863, the administration of the new national banking system was vested in the newly created OCC and its chief administrator, the Comptroller of the Currency. The law was completely rewritten and reenacted as the National Bank Act (1864), which authorized the Comptroller of the Currency to hire a staff of national bank examiners to supervise and periodically examine national banks. The act also gave the Comptroller authority to regulate lending and investment activities of national banks. Today the Comptroller is appointed by the president, with the advice and consent of the Senate, for a five-year term. The Comptroller also serves as a director of the Federal Deposit Insurance Corporation (FDIC) and of the Neighborhood Reinvestment Corporation. OCC examiners conduct on-site reviews of national banks and supervise bank operations. The agency issues rules, legal interpretations, and corporate decisions concerning banking, bank investments, bank community development activities, and other aspects of bank operations. National bank examiners supervise domestic and international activities of national banks and perform corporate analyses. Examiners analyze a bank’s loan and INVESTMENT portfolios, funds management, CAPITAL, earnings, liquidity, sensitivity to market RISK, and compliance with consumer-banking laws, including the Community Reinvestment Act. They review the bank’s internal controls, internal and external AUDITING, and compliance with the law. They evaluate the bank management’s ability to identify and control risk, particularly maturity matching (DURATION), and maintain collateral documentation.
In regulating national banks, the OCC has the power to
• examine the banks
• approve or deny applications for new charters, branches, capital, or other changes in corporate or banking structure
• take supervisory actions against banks that do not comply with laws and regulations or otherwise engage in unsound banking practices (i.e., remove officers and directors, negotiate agreements to change banking practices, and issue cease-and-desist orders as well as civil money penalties)
• issue rules and regulations governing bank investments, lending, and other practices
One of the reasons Congress passed the National Currency Act was to finance the Civil War. Although national banks no longer issue currency, they continue to play a prominent role in the nation’s economic life. Today the OCC regulates and supervises more than 2,200 national banks and 56 federal branches and agencies of foreign banks in the United States, accounting for more than 55 percent of the total ASSETS of all U.S. commercial banks. Any bank with “national” in its name is chartered under the OCC. Banks can also choose to be chartered under state banking laws. The OCC does not receive any appropriations from Congress. Instead, its operations are funded primarily by assessments on national banks. National banks pay for their examinations, and they pay for the OCC’s processing of their corporate applications. The OCC also receives revenue from its investment INCOME, primarily from U.S. TREASURY SECURITIES.