WASHINGTON (Reuters) - A regulator of the top U.S. banks on Tuesday published new ground rules over when it would tell banks to hire outside consultants, after critics accused it of botching a review of past home foreclosures.
The Office of the Comptroller of the Currency could require a bank to retain an independent consultant if the problems are severe and the agency is concerned about the bank’s ability to fix the issues, it said in the new guidance.
Those banks would also have to vet the consultant’s credentials and independence, and provide that information to the OCC. The agency could still veto a selection if that review did not meet its standards, the OCC said.
“While consultants can provide knowledge, expertise, and additional resources, we must take care to ensure they maintain independence and are subject to appropriate oversight,” Comptroller of the Currency Thomas Curry said in a statement.
The new guidance comes months after lawmakers and advocates heaped criticism on the agency for its management of a consultant-led review that had been intended to compensate borrowers harmed during the 2009-2010 foreclosure crisis.
The OCC and other regulators told more than a dozen banks to hire consultants to review their past foreclosures for any problems, but those reviews proved slow and expensive.
Banks spent some $2 billion on the reviews, much of it paid out to the firms that conducted them, including Promontory Financial Group, PriceWaterhouseCoopers, Ernst & Young, and Deloitte & Touche, amounting to nearly $20,000 per loan file.
Earlier this year regulators decided the reviews were taking too much time and money with no funds yet paid to any borrowers. Thirteen banks agreed to pay $9.3 billion to end the reviews and directly compensate foreclosed borrowers.
The OCC has also required similar consultants in cases where it ordered banks to improve their anti-money laundering programs and review past transactions for suspicious activity.
Other regulators have also cracked down on the use of outside consultants. In June, Deloitte’s financial advisory unit agreed to pay $10 million and refrain for one year from new business with certain New York banks to settle accusations from New York’s Department of Financial Services related to the firm’s review of money laundering controls at Standard Chartered Bank.
At the time the head of the New York agency, Benjamin Lawsky, said the case was just the start of an investigation aimed at reforming the consulting industry.
Reporting by Aruna Viswanatha; Editing by Chris Reese