OCC Brings Back Size-Based Oversight Structure

The Office of the Comptroller of the Currency (OCC) is reversing course on a short-lived plan to consolidate supervision across large, midsize, and community banks. Effective October 1, the OCC will scrap its Bank Supervision and Examination group and instead re-establish three separate supervisory lines of business: 

• Large and Global Financial Institutions — banks with assets above $500 billion or a foreign parent company 

• Regional and Midsize Financial Institutions — banks with $30–500 billion in assets 

• Community Banks — institutions with less than $30 billion in assets 

Each will be led by a senior deputy comptroller reporting directly to Comptroller of the Currency Jonathan Gould. “This realignment is consistent with our historic risk-based supervision approach and my commitment to tailor supervision to bank risk profile,” Gould said. 

Why It Matters 

For smaller and midsize banks, the change is seen as a relief. The OCC’s April consolidation had raised concerns that supervisory expectations designed for the largest, most complex firms might be applied wholesale to banks with simpler business models and lower systemic risk. In a July comment letter, ProSight’s Mid-Tier Bank Council warned that mid-tier institutions could be subject to “outsized regulatory frameworks and supervisory practices that are more appropriate for large banks that pose systemic risk.” 

By returning to a tiered structure, the OCC is signaling that supervision will once again be calibrated to asset size, business model, and risk profile. The agency also said the reorganization will help with examiner development and resource management. 

Next Steps 

Leadership for the midsize and community bank groups will be named in early October. The OCC also announced changes to the Office of the Chief National Bank Examiner, streamlining it into five divisions covering supervision systems, credit risk, compliance and operational risk, economics, and capital/market risk. 

ProSight’s Perspective 

ProSight emphasized the importance of regulatory calibration in its letter to the OCC, stating that that regulatory frameworks should be tailored for mid-tier banks to strike “an appropriate balance between the lighter touch generally applied to community banks and the type of intensive oversight applied to large, systemically important financial institutions.” 

“Mid-tier banks don’t have the size, scale, or systemic footprint of the country’s largest institutions, and it’s encouraging to see the OCC restore a framework that recognizes those differences,” said Ed DeMarco, managing director at ProSight. “Tailoring supervision to risk profile allows banks the latitude and opportunity to demonstrate their own proactive, risk-based approach to the development, implementation and administration of risk management programs, which will benefit all stakeholders.”