OCC Comptroller Hsu: Political Polarization Poses Long-Term Risk to Banking

Political polarization presents a long-term risk to banking, Acting Comptroller of the Currency Michael J. Hsu said Wednesday (July 17). The Office of the Comptroller of the Currency (OCC) has seen a risk of fragmentation as it monitors banking law developments at the state and local level, Hsu said in written remarks delivered at the Exchequer Club. “To […]

The post OCC Comptroller Hsu: Political Polarization Poses Long-Term Risk to Banking appeared first on PYMNTS.com.

Political polarization presents a long-term risk to banking, Acting Comptroller of the Currency Michael J. Hsu said Wednesday (July 17).

The Office of the Comptroller of the Currency (OCC) has seen a risk of fragmentation as it monitors banking law developments at the state and local level, Hsu said in written remarks delivered at the Exchequer Club.

“To varying degrees the culture wars, identity politics and weaponization of finance are pushing toward greater and greater fragmentation of the U.S. financial system,” Hsu said in the remarks. “Increasingly banks are being asked by states to pick a side in service of performative politics rather than deliberative policy.”

Reuters said in a Wednesday report that Texas has passed laws saying that banks can’t do business with the state if they discriminate against industries like fossil fuels or firearms, and that Florida and Texas passed laws prohibiting banks from discriminating against anyone on the basis of political or religious beliefs.

Hsu said in his written remarks that the OCC is a bulwark against this trend, noting that the regulator got its start in the 1800s by unifying the then-fragmented banking system.

“The OCC has and will continue to vigorously defend preemption, as it is central to the dual banking system and cuts to the core of why we exist and who we are,” Hsu said.

Hsu also identified two other “underappreciated long-term risks to banking” in his remarks.

One is the growing number and size of large banks. Hsu said that in the time since the most recent regulations applicable to large banks were completed — Dodd-Frank in 2014 — the total assets of large banks has grown from $10 trillion to $17 trillion.

“To avoid repeating the mistakes of the past, large banks need strong foundations — i.e., large banks need to be resilient, resolvable and manageable,” Hsu said.

A third long-term risk to banking is the complexity of the relationships between banks and nonbanks, Hsu said. This complexity has led to greater interdependencies between the two and “blurring the line between banking and commerce.”

“This makes it challenging to know who is responsible for what — a challenge that is playing out tragically for the millions of consumers and end-users caught up in the Synapse bankruptcy,” Hsu said.

The post OCC Comptroller Hsu: Political Polarization Poses Long-Term Risk to Banking appeared first on PYMNTS.com.