U.S. regulator to rotate bank examiners, move some out of firms

WASHINGTON (Reuters) - A U.S. regulatory agency that drew criticism for being too cozy with banks ahead of the 2007-09 financial crisis said on Wednesday that it will now rotate examiners at big U.S. banks every five years, with fewer examiners housed at banks.

The U.S. Office of the Comptroller of the Currency (OCC) also said it will devote more resources to multi-bank analyses conducted by special experts, separate from standard exams.

The OCC has been pushing to revamp its oversight of big banks. The announcement follows recommendations issued in December by an international group.

Comptroller of the Currency Thomas Curry asked regulators from Australia, Singapore and Canada to review his agency’s oversight of large- and mid-sized banks.

“Facilitating the sharing of information and knowledge among examiners across institutions and rotating examiner assignments will allow us to provide a fresh and broader perspective to the examination of each large institution,” Curry said in a statement on Wednesday.

The OCC said implementation would start in the next few months.

The global group’s toughest suggestions focused on supervision of the biggest 19 banks and the practice of housing examiners on-site at firms such as JPMorgan Chase, Citigroup and Bank of America.

Examiners are meant to gain expertise by working on site, but critics say the arrangement leads examiners to identify too closely with firms they should scrutinize.

Currently, about 390 of the 520 large-bank examiners work out of the banks they supervise, OCC spokesman Bryan Hubbard said. He said top examiners rotate among banks, but there is no formal process to move lower-level staff around.

The international regulators suggested moving examiners into central offices, rotating them among banks, and handing more authority to so-called “lead experts,” OCC officials with expertise in areas such as credit or operational risk who look across multiple firms to spot problems.

The OCC said it would reduce the number of examiners housed at banks, in part by hiring some of them as lead experts. The expert program would increase from 21 officials to about 100.

“While the decision reduces the number of examiners on site at a particular bank, it does not affect the overall number of examiners assigned to an individual institution or to the supervision of large banks as a whole,” the OCC said.

Bank examiners will rotate to another large firm in the same city every five years, the OCC said. Assistant deputy comptrollers would also see their work assignments rotate.

The OCC also said it would test a new risk management program and benchmark its activities against international peers. Both were also recommended by the global group.

Reporting by Emily Stephenson; Editing by David Gregorio