REUTERS SUMMIT-U.S. regulator says some banks still 'too big to manage'
(For other news from Reuters Financial Regulation Summit, click here)
WASHINGTON, April 29 (Reuters) - A top U.S. federal regulator said on Tuesday that it's going to "take a lot of work" before officials can be confident that Wall Street banks are not too complex to manage.
Comptroller of the Currency Thomas Curry said his agency has a renewed focused on the issue, bolstering its supervision of the big banks and requiring them to get a better handle on how they manage risky activities across all units.
He also said the Office of the Comptroller of the Currency (OCC) is having an "active discussion" with big banks about how to simplify their legal structures.
"There is a level of rationalization that needs to happen," Curry said at the Reuters Financial Regulation Summit. The OCC oversees the nation's largest banks, along with the Federal Reserve.
Curry, who has helmed the OCC since April 2012, said he could not predict when regulators would be satisfied that banks are not too big to manage effectively.
"I think that's the goal. I don't think I can predict when," he said. "It's going to take a lot of work."
The debate over whether banks are not only "too big to fail" but also "too big to manage" was reignited in recent days.
Citigroup's top leaders said last week the bank needed to do more to simplify itself after the Federal Reserve recently denied the firm's request to return capital to shareholders.
And on Monday, Bank of America announced that it had suspended its dividend and plans to buy back shares after uncovering a mistake calculating its regulatory capital level.
The error, which had gone unnoticed by the firm and its regulators for several years, had previously led it to overstate its capital buffer by about $4 billion. The flub caused observers to question how thoroughly banks and their regulators are scrutinizing firms' books.
Curry said his agency plans to finalize its framework of tougher expectations for banks' risk management, including new responsibilities for top executives and directors, this year.
That reform grew out of another flashpoint in the debate over bank complexity - the 2012 London whale debacle, in which JPMorgan Chase lost billions of dollars on risky trades.
The screw-up caused critics to question how managers and regulators had overlooked massive risk-taking by an overseas unit of the bank. Curry, who was a director at the Federal Deposit Insurance Corp during the financial crisis and was confirmed to lead the OCC about the time the JPMorgan scandal broke, was grilled by lawmakers over the OCC's failure to spot the dangerous trades.
The OCC's proposed reforms would boost oversight by banks' boards and push them to provide more information about their risk-taking and management strategies, a program known internally as "heightened expectations."
Curry said ensuring safety is "much more complex" for the biggest banks. He would not comment on individual firms but said the new framework would help uncover accounting problems like the ones that led Bank of America to overestimate its capital.
"You're never going to eliminate all risk, I mean, that's not the role of the supervisor," he said. "What we're trying to make sure ... is that they have the appropriate framework in place that will mitigate against most if not all of those risks."
In a formal comment on the "heightened expectations" proposal, Citi's OCC-regulated unit said it supported the general approach but asked the agency to place less responsibility on directors, saying that would reduce the likelihood qualified people would want to serve on bank boards.
(Reuters Insider interview with Curry: reut.rs/1koqxkh)
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(For more summit stories, see ) (Reporting by Emily Stephenson; Editing by Karey Van Hall and Sandra Maler)
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