The Office of the Comptroller of the Currency (OCC) has proposed a significant change in banking regulation, aiming to limit the most stringent supervisory standards to only the largest financial institutions. This new rule, which is open for public comment, seeks to raise the asset threshold from $50 billion to $700 billion. As a result, the number of banks subject to these heightened regulations would decrease dramatically from 38 to just 8.
The OCC states that the current regulatory framework has become excessively burdensome for mid-sized banks and is only warranted for the largest, most complex institutions that pose systemic risks. The proposed changes reflect a broader shift in regulatory philosophy, aligning with Treasury Secretary Scott Bessent’s call for a more unified approach to deregulation across financial agencies.
Under the new proposal, banks that fall below the $700 billion asset threshold would no longer be subjected to stringent standards related to board oversight, risk management, internal controls, and accounting practices. The OCC anticipates that these institutions will voluntarily develop tailored risk governance frameworks.
According to the agency’s analysis, the proposed rule could result in substantial cost savings for banks, estimated to range from $54 million to $123 million collectively. These savings stem from expected staff reductions and improved operational efficiencies. The OCC’s preliminary assessment suggests a potential 10 percent reduction in staff among the newly exempt banks, which could translate to approximately $67 million in savings.
The public will have 60 days to submit comments on the proposal following its publication in the Federal Register, scheduled for December 30, 2023. This initiative marks a decisive move away from the regulatory framework established in the aftermath of the 2008 financial crisis, reflecting a shift towards a more innovation-friendly environment in banking.
In addition to easing regulatory burdens, Bessent has emphasized the need for regulatory bodies, including the OCC and the Federal Deposit Insurance Corporation (FDIC), to adopt a more collaborative approach. In a speech delivered in March 2024 at the Economic Club of New York, he noted the importance of ensuring that regulatory agencies are “singing in unison” regarding deregulation efforts.
Comptroller of the Currency Jonathan Gould has echoed Bessent’s vision, advocating for a more focused approach to bank supervision that prioritizes business efficiency over post-crisis risk aversion. He has indicated that previous regulations, designed to mitigate risks following the financial crisis, have stifled banking relevance and driven activities outside of traditional banking channels.
Gould has also highlighted the potential role of qualified fintech companies in expanding the banking sector’s reach, while maintaining that they must be subject to comprehensive oversight. As the OCC moves forward with its proposal, the balance between regulatory oversight and fostering innovation will remain a critical focal point for the future of banking in the United States.
