By Emily Stephenson
WASHINGTON Jan 16 Big U.S. national banks would
have to report their risk appetites and boost oversight by their
boards under news rules proposed by a U.S. bank regulator on
Thursday to help avoid a repeat of the 2007-2009 financial
The Office of the Comptroller of the Currency (OCC) issued
the guidelines as part of its "heightened expectations" program
for the biggest U.S. banks.
Bank regulators, particularly the OCC, came under intense
scrutiny for not cracking down on dangerous activity that fueled
the 2007-2009 financial crisis.
The OCC also faced criticism after the "London whale"
incident, in which traders at JPMorgan Chase placed
outsized bets that wound up costing the bank billions of
Regulators and lawmakers said that incident occurred in part
because JPMorgan's management failed to scrutinize risk-taking
in every part of the bank. The bank's directors also were caught
unaware of the activity.
JPMorgan wound up paying more than $1 billion to resolve
regulatory probes over the issue.
"These rules represent our collective experience since and
before the financial crisis as to what works and doesn't work
from a risk management and from a corporate governance
standpoint," Comptroller of the Currency Thomas Curry said on
CNBC on Thursday.
"Our hope is that if we can institutionalize this across the
universe of the large banks that we supervise, you can
dramatically reduce the potential incidence of risk management
failures like the London whale," he said.
Officials said the proposed requirements would apply to
national banks with more than $50 billion in assets. The agency
could apply the standards to smaller firms that officials deem
Under the standards, bank executives would need to detail
their firms' willingness to take risks, including quantitative
limits. Boards of directors, which would include at least two
members from outside the bank, would ensure the risk framework
was effective and that management followed it.
Boards also should challenge or oppose decisions by bank
managers that could threaten the banks' safety, the OCC said.
Firms that failed to meet the tougher standards would have
to craft a plan to comply and could eventually be subject to OCC
enforcement action, the agency said.
The OCC said it will take comments on the proposed changes
for 60 days. Following the comment period, the OCC could
finalize and implement the new rules.