Comptroller of the Currency Joseph Otting said June 14 that he is working with the Securities and Exchange Commission to clarify rules that would make it easier for companies to merge their bank subsidiaries into their holding companies.
Otting told the Senate Banking Committee that there is a memorandum of understanding between the two agencies on how banks without holding companies should report financial data. Under current law, banks are not required to file financial data with the SEC. But Otting said banks have expressed concern over the standardization of financial information from firms that do not have holding companies and therefore do not have to follow the SEC's existing requirements.
Otting also said Congress may need to step in to address another barrier for companies hoping to consolidate: securities issuance rules. Otting said holding companies have an easier time issuing new shares than banks do, since banks are required by law to hold a vote among all shareholders for any incremental amount of new shares.
Several banks, the largest being Zions Bancorp., have launched efforts to scrap their holding companies to simplify regulatory reporting. Among other relief, shedding the bank holding company also removes the Federal Reserve as a primary regulator.
But many banks have acknowledged that there are operational and legal challenges to making the structural change. Bank of the Ozarks, for example, pursued state law changes when it consolidated its subsidiary into its holding company.
"We have seen a significant increase in interest at banks that are predominantly doing core banking activities," Otting said. He said there are a number of holding company-related rules where the OCC has the authority to "do workarounds."
Otting's comments come one day after he caught fire from lawmakers for testifying that he had "never observed" discrimination in the U.S. along racial, ethnic, gender or socioeconomic lines. Otting on June 14 clarified that he meant that he had never "personally experienced" discrimination, adding that he acknowledges inequity and believes that there is disparate impact occurring in America.
Otting also defended reports that he had purchased hundreds of shares of financial companies while he awaited Senate confirmation to serve as comptroller, insisting that all of the transactions were managed by a third party. Otting said his financial manager had been managing the portfolio independently, adding that all activity was stopped as soon as he was sworn into office.