U.S. financial institutions can choose either state or federal oversight, although it is more common for banks to switch from federal supervision to more-accessible state regulators. The OCC serves as the national bank regulator.
No state banks converted to OCC oversight from 2014 to 2016, according to the Federal Deposit Insurance Corp.
“The national bank charter continues to have great value in providing banks a flexible regulatory framework,” Trump-appointed OCC Comptroller Joseph Otting told the WSJ in an email.
Data from state regulators show that larger banks are more likely to convert from state to federal management, the article said, with more than $100 billion in bank assets moving from state to federal oversight through such conversions in 2018.
“We believe a national charter will be more efficient, given national banks are regulated and examined by the OCC, rather than on a state-by-state basis, and subject to a uniform set of laws and regulations,” Gary Rhodes, a spokesman for Fifth Third, said in an email to the news outlet.
Critics, however, charge that allowing banks to “shop around” is “regulatory arbitrage” and fuels leniency.
“It’s clear that we’ve gone back to the days when the OCC was the cheerleader for the national banking industry and an aggressive champion for every kind of deregulation,” Arthur Wilmarth, a law professor at George Washington University, told the paper. He has advised state regulators in lawsuits against the OCC.
In 2017, for example, the U.S. division of Japan’s biggest bank, Mitsubishi UFJ Financial Group, avoided an investigation by the New York Department of Financial Services by switching to OCC oversight.
The OCC announced in July that it’s planning to increase oversight by realigning about 150 staff members in two new units, consolidating bank supervision support, risk analysis, and oversight of national trust banks and important service providers. The move was several months in the making and helped on by analysis of the department’s functions.