Office of the Comptroller of the Currency Exam Process
U.S.BankingSystemandForeignBankingOrganization
SupervisoryStructure
December7,2016
2
1. InternationalBankingSupervisionOverview
2. FederalBranchSupervision
3. SupervisoryTools
Agenda
3
Agenda
1. InternationalBankingSupervisionOverview
2. FederalBranchSupervision
3. SupervisoryTools
LegalVehiclesAvailabletoFBOstoCreateaPresenceintheUnitedStates
OCCSupervised
FederalBranch OfficesofforeignbanksthatcanengageinacommercialbankingbusinessintheU.S.includingtheacceptanceofdomesticwholesaledeposits
LimitedFederalBranch AfederalbranchthatacceptsonlythosedepositspermissibleforanEdgeActcorporationtoreceive
FederalAgency OfficesofforeignbanksthatcanengageinacommercialbankingbusinessintheU.S.butcannotgenerallyacceptdomesticdepositsorexercisefiduciarypowers
ForeignBankSubsidiary Companiesowned25%ormorebyabankholdingcompanyorforeignbank
4
5
LegalFrameworkInternationalBankingAct,1978
Substantiallyequalizedtreatment(nationaltreatment)ofU.S.operationsofforeignandU.S.banks
Madefederallicense,issuedbyOCC,availableforforeignbanks,inadditiontotheexistingstatelicenseoption
ForeignBankSupervisionEnhancementAct(FBSEA),1991
ExpandedoversightroleoftheFederalReserveincludingpowertoapproveandterminateU.S.operationsofFBOs,includingfederalbranches/agencies
ApprovalofFBOpresence applicationprocessandComprehensiveConsolidatedSupervision(CCS)determination
Prohibitedforeignbranchesfromapplyingfordepositinsurance
6
LegalFrameworkRiegleNealInterstateBankingandBranchingEfficiencyAct,1994.
EssentiallycreatednationaltreatmentforFBOsininterstatebankingandbranching
GrammLeachBlileyAct(GLBA),1999
Removedbarriersbetweenthebanking,securities,andinsuranceindustries AuthorizedFinancialHoldingCompanies(FHC)
DoddFrankWallStreetReformandConsumerProtectionAct(DFA),2010
FocusesonstrengtheningthefinancialstabilityoftheU.S.andincludes: HeightenedsupervisoryexpectationsforFBOs>$50billionintotalU.S.
assets Includesenhancedprudentialstandardsforlargebankingorganizations
Section165EnhancedPrudentialStandards(EPS)forFBOsfinalizedinFebruary2014
7
PreDFAApproachtoFBOs
FBOsallowedtostructureU.S.operationsinamannerthattheyfindmostefficientwithappropriaterestrictions
RelianceonhomecountrysupervisionoftheFBOsworldwideoperations
RelianceonstateandfederalfunctionalregulatorstosupervisetherelevantentitiesoperatedbyFBOsintheU.S.
SignificantrelianceontheparentbanktosupportitsU.S.operations
8
CertainFBOsrequiredtoestablishanintermediateholdingcompany(IHC)
Enhancedriskbasedcapitalandleveragerequirements
Enhancedliquidityrequirements
Enhancedriskmanagementandriskcommitteerequirements
Stresstestrequirements
RequiresenhancedprudentialstandardstoincreaseinstringencybasedonthesizeandcomplexityoftheFBO RulesgenerallyapplytoFBOswithaU.S.bankingpresenceandtotal
globalconsolidatedassetsgreaterthan$50billion StandardsincreaseinstringencyforFBOswithcombinedU.S.assets
greaterthan$50billionduetotheincreasedrisktheymayposetotheU.S.financialsystem
PostDFA Section165(RegulationYY)EnhancedPrudentialStandardsforFBOs
9
Beganin1995asaresultofBankofCreditandCommerceInternational(BCCI) CoversallforeignbanksoperatingintheU.S.
FocusistounderstandtheheadofficeanditsabilitytosupportU.S.operations HomeCountryFinancialSystem AccountingAnalysis InstitutionalOverview StrengthofSupportAssessment(SOSA)andSOSAranking
Communicationofresultstoheadofficemanagementandhomecountrysupervisor CombinedU.S.OperationsRating IndividualU.S.Entities
TheFBOProgramiscurrentlybeingreviseddueto: Bettertransparency,timelyinformation,betteranalysisbyexternalparties;and FedsEnhancedPrudentialStandardsrequirementsforFBOs.
InteragencyFBOSupervisionProgram
10
FBOsaredifferent:managementfromadifferentcountrymaylackknowledgeofU.S.customs,culture,laws®ulations.
HostCountryvs.HomeCountrySupervisor
RoleofHostCountry EvaluatetheoverallabilityofFBOtosupportitsU.S.operations Maintainanunderstandingofglobalriskmanagementand
controlsystemsasappliedtoU.S.operations ProvideaccesstoinformationconcerningU.S.operationsof
FBOs Exchangeinformationwithhomesupervisorandcoordinate
whensupervisoryfollowupisnecessary
UniqueFactorsinFBOSupervision
11
Waysinwhichinformationisshared: Adhocmeetings/conversations Bilateralmeetings/discussions Supervisorycolleges Participationinexaminations AnnualsummaryofconditionletterincludingSOSAranking Sharingofexaminationreports
InformationSharingArrangements Inplacewithbanksupervisorsinmanyjurisdictionsglobally Maynotberequiredlegallyandusuallyhasnolegaleffect
butgenerallyservestoexpeditetheprocess
CommunicationsandCoordinationwithHomeCountrySupervisors
12
1. InternationalBankingSupervision
2. FederalBranchSupervision
3. SupervisoryTools
Agenda
13
ForeignOwnedSubsidiariesandBranchesForeignOwnedBankingSubsidiaries
Separatelegalentity
LocalBoardofDirectorsandPresident
Separatecapital
Traditionalbankfundingsources
FDICinsured
FDICisresolution/receiver
FileCallReportForm031or041
RatedusingCAMELS
Branches
Notstandaloneentities
DependentonHeadOfficeBoardorCommittee;LocalGeneralManager
Capitalequivalencydeposit(CED)
Primarilyheadofficefunding
Nodepositinsurance
OCCisresolutionauthority
FileCallReportForm002
RatedusingROCA
SubjecttoOCCssupervisionbyriskphilosophy.
Banksupervisorycycleandactivities:
Afullscope,onsiteexamination,willoccuratleastonceduringeach12month period.TheOCCmayextendthisrequirementto18months if: Thebankhastotalassetsoflessthan$500million Thebankiswellcapitalizedasdefinedin12CFR6 Atitsmostrecentexamination,RiskManagementwasrated1or2,and
theCompositeratingwasa1or2. OtherfactorsspecifiedintheBankSupervisionProcessComptrollers
Handbook
Quarterlyoffsitemonitoring
Targetsandfollowup(ifnecessary)
14
ForeignOwnedSubsidiariesandBranches
Evaluatetheoverallintegrityandeffectivenessofriskmanagementsystems.
Communicatefindingstolocalmanagement.Forfederalbranches,alsocommunicatewithheadofficeandhomeregulators.
Subjecttothesamelaws,regulations,policiesandproceduresthatapplytonationalbanks.
15
ForeignOwnedSubsidiariesandBranches
RatingSystem
R:RiskManagementO:OperationalControlsC:ComplianceA:AssetQuality
AppliestoindividualFBObranchesandagencies
15scale
AppendixFoftheBankSupervisionProcessComptrollersHandbook:https://occ.gov/publications/publicationsbytype/comptrollershandbook/banksupervisionprocess.pdf
16
RiskManagement Determinetheextentthatriskmanagementsystemsare
adequateto:
Controlriskexposuresthatresultfrombranchactivities
EnsureeffectiveoversightbyHOandbranchmanagementofbranchactivities
Includes3rd partyrelationshipssuchasITservicingandoutsourcingarrangements DeterminecompliancewithriskmanagementandcapitalstresstestingrequirementsoftheFBOEnhancedPrudentialStandardsrules ConclusiononBSA/AMLriskmanagementsystems Conclusiononcreditadministrationsystems
17
OperationalControls
18
Assesstheeffectivenessof: Internalcontrols,includingaccountingandfinancialcontrols
Internalandexternalauditfunction Informationtechnology
Compliance
19
Assesscompliancewith: Safetyandsoundnessregulationsapplicabletothebranchactivities
BSA/AMLrequirementsConsumerregulations,ifthebranchoffersproductsgovernedbyconsumerlaws
RegulatoryreportingCEDrequirements
AssetQuality
20
RatingisbasedonthelevelofproblemsassetsAllloandocumentationandanalysesshouldbeinEnglish
Creditriskdefinitionsandregulatoryclassificationsapply
NoALLLrequired LegallendinglimitisbasedonHOcapital
ROCARatingsforIBSPortfolio
21
RiskAssessmentSystem
22
RISKCATEGORY
AggregateRisk
(High,Moderate,
Low)
QuantityofRisk
(High,Moderate,Low)
QualityofRiskManagement
(Weak,Insufficient,Satisfactory,Strong)
Direction
(Increasing,Stable,
Decreasing)
CreditInterestRateLiquidityPriceOperationalComplianceStrategicReputation
RiskAssessmentSystemCommunicatesthequantity ofrisk,thequality ofriskmanagement,thelevelofsupervisoryconcern(measuredasaggregate risk),andthedirection ofriskforeightriskcategories.
QuantityofRisk:Reflectsthelevelofriskassumedinthecourseofdoingbusiness.
QualityofRiskManagement:Assesseswhetherthebanksriskmanagementsystemsarecapableofidentifying,measuring,monitoringandcontrollingthatamountofrisk.
AggregateRisk:Assessthecurrentriskprofile.
DirectionofRisk:Speakstotheprospectiveviewoftheriskprofile.
23
RiskAssessmentSystemTheQualityofRiskManagementassesseshowwellrisksareidentified,measured,controlled,andmonitored.
Strong:Qualifiedpersonnel,effectiveriskidentificationandanalysis,cleardesignationandappropriateseparationofresponsibilities,accurateandtimelyinformationflow,andestablishedmonitoringandfollowupprocesses.
Satisfactory:Overallriskmanagementpracticesaresatisfactoryrelativetotheinstitution'ssize,complexity,andriskprofile.
Insufficient:Reflectsthepresenceofconcernsthatmayadverselyaffectabanksconditionifnotcorrected.Theseconcernsprecludeasatisfactoryassessment,butdonotsupportafindingthatriskman
