Acting Comptroller Williams Discusses History and Characteristics of National Banks

WASHINGTON – Acting Comptroller of the Currency Julie L. Williams noted recent developments in federal/state jurisdiction over national banks and discussed how those developments relate to the history and characteristics of the national banking system and the bank supervisory process. She emphasized that the heart of the OCC’s responsibility is to assure that national banks are safe and sound and conduct their business in accordance with law, and that this helps assure that national banks have the capacity to lend to credit-worthy borrowers and serve all their customers and communities fairly and with integrity.

"When national banks meet these standards, the national banking system benefits all Americans and strengthens our economy," Ms. Williams said in a speech before the New York Bankers Association.

"The Comptroller's responsibility to assure that national banks conduct their business in accordance with law is not one-dimensional," Ms. Williams said. "It is not just a policing function to verify and enforce compliance with restrictions and requirements in applicable laws. We also have a responsibility to assure that national banks have the ability to operate – consistent with safety and soundness – in accordance with applicable law, including the powers granted to them and supervisory regime provided for them under federal law."

Since the 1860's, Congress vested the OCC with exclusive "visitorial" powers, which included comprehensive authority to examine, supervise, regulate, and sanction a national bank, Ms. Williams said. Preemption isn't a new concept and has long been recognized with respect to the powers and authorities granted national banks under the National Bank Act. Together, the uniformity of powers and operating standards that result from Federal preemption, coupled with the OCC's exclusive visitorial authority, have long been recognized as defining characteristics of the national bank charter.

Ms. Williams noted that when the OCC takes a position that, because of the OCC's exclusive visitorial authority, a state official does not have jurisdiction over a national bank, sometimes the reaction is to point to the number of public enforcement the agency has brought and contend that the OCC won't be "tough" enough.

"This perception profoundly misunderstands the character and effectiveness of the bank supervision process," she said.

Ms. Williams highlighted how the bank supervisory process, for both national and state banks, is uniquely extensive and comprehensive and exerts extraordinary authority through ongoing supervisory communication and other informal means. Additionally, the supervisory process entails constant adjustments, corrections and remediation by banks base on the communications between the regulated bank and the bank supervisory agency.

"When supervisors identify an issue, we expect it to be fixed, promptly, without having to resort to subpoenas for the information we need or to enforcement action to achieve the result we seek," Ms. Williams said. "We certainly have the ability to bring formal enforcement cases against banks, and we do not hesitate to do so when appropriate, but, in practice, the need to do so is infrequent."

"No one is suggesting that banks are perfect, but do those outside the banking industry make the connection between the fundamental health, stability, integrity and attention to reputation of today's banking system, on the one hand, and the role of bank supervision, on the other," she asked. "Perhaps not, but they should not assume that the work of the bank supervisors—the business of principled bank supervision—isn't being conducted with the utmost vigor simply because waves of press releases announcing formal enforcement actions are not forthcoming."

"Because of the confidentiality of bank supervision and examination, there are no headlines to trumpet those accomplishments," Ms. Williams stated. "The very openness and candor that make the bank supervisory process so effective are premised on the confidentiality of bank-supervisor communication."

She concluded her remarks by stating the OCC must always be thorough and use sound judgment and balance in supervision; that the agency cannot rush to judge issues before all the relevant facts are on the table; and that the OCC must not hesitate to take strong action when it is warranted.

"Ultimately, our goal is not simply wielding enforcement authority or gaining publicity," Ms. Williams said. "It is about ensuring that national banks are in compliance with the law so they can fulfill their responsibilities to their customers, their communities, and to their country."

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