TCH Letter to OCC on Proposed Heightened Standards Offers Support, Suggests Clarification of Certain Aspects of Proposed Guidelines
FOR IMMEDIATE RELEASE
New York, NY – March 28, 2014 – The Clearing House Association (TCH) submitted a comment letter to the Office of the Comptroller of the Currency (OCC) today in response to the agency’s January 2014 proposed guidelines that would establish minimum standards for risk governance and bank boards of directors for banks with $50 billion or more in total consolidated assets. In its letter, TCH reiterates its strong support for the primary objective of the guidelines – a strong and effective risk management framework for banks – but recommends clarification of certain key aspects of the proposed guidelines in order to ensure that they achieve their stated purpose.
“The Clearing House strongly supports the OCC’s heightened expectations program for large banks and shares the goal of strong risk management frameworks at banks, though we believe that it is important that these standards be formalized in a way that is clear, provides sufficient flexibility for each bank to apply them in a manner that best supports effective risk management at their individual institutions, and respects the appropriate role and responsibilities of boards of directors relative to management,” said Gregg Rozansky, Managing Director and Senior Associate General Counsel at The Clearing House.
Among its comprehensive comments on the proposal, TCH’s letter emphasizes three key points. First, TCH cautions that, to the extent the proposed guidelines would require a “siloed” risk management framework at the bank level, it could unnecessarily duplicate risk management functions across institutions and limit the ability of a consolidated group to achieve a cohesive, enterprise-wide approach to risk management. Second, TCH recommends that the OCC’s “three lines of defense” framework recognizes the fundamental differences between non-revenue generating units that engage in significant control functions (i.e., Legal, Compliance, Finance, Treasury, IT, and Human Resources) and revenue-generating business units and allows classification of support units at individual banks based on the nature of the functions they actually perform. Third, TCH suggests changes to particular language in the proposed guidelines that may be interpreted as potentially assigning managerial and operational responsibilities to the board of directors and exposing directors to enhanced legal liability.
TCH’s letter reinforces sound bank governance themes from its Guiding Principles for Enhancing Banking Organization Corporate Governance published in 2012. In an effort to continue its role as a constructive thought leader in the area of bank corporate governance, TCH will release an update to those Guiding Principles later this year.
About The Clearing House Established in 1853, The Clearing House is the oldest banking association and payments company in the United States. It is owned by the world’s largest commercial banks, which collectively employ more than 1.4 million people and hold more than half of all U.S. deposits. The Clearing House Payments Company L.L.C. provides payment, clearing, and settlement services to its member banks and other financial institutions, clearing almost $2 trillion daily and representing nearly half of the automated-clearing-house, funds-transfer, and check-image payments made in the U.S. The Clearing House Association L.L.C. is a nonpartisan advocacy organization representing – through regulatory comment letters, amicus briefs, and white papers – the interests of its owner banks on a variety of systemically important banking issues.