The New York Fed started a similar effort years ago to ship most of its roughly 200 in-house examiners to its downtown offices. So far, only a small number of people have moved, according to a person with knowledge of the process who asked not to be named because the agency hasn't publicly laid out the details of its plan. The Fed still intends to relocate employees, the person said.
The OCC began reevaluating things under Keith Noreika, a former bank lawyer who ran the agency on an acting basis for several months this year. He thought it made sense to pull examiners out in smaller cities such as Pittsburgh, but not in New York, where office space is notoriously expensive.
"There seemed to a directive existing before I got here that they have to be moved out, whatever the cost," Noreika, who plans to return to the private sector, said in an interview. "I just put a pause on that because I wanted us to continue effective supervision."
Noreika said he doesn't buy arguments that an on-site presence translates to regulatory capture, or a growing tendency to be sympathetic to industry viewpoints. He added that when he worked as an attorney for banks, his interactions with examiners were limited.
"My own experience with the OCC being on premises is it was entirely sacred space," he said. "You weren't allowed to eat lunch with them."
But a confidential study commissioned by the New York Fed in 2009 that was later made public paints a different picture. The report said in-house examiners relied on good relationships with bankers to do their jobs and often believed "that a non-confrontational style will enhance that process." It also noted an "excessive deference" to lenders and a reluctance "to press changes on the supervised banks."
(With assistance from Ben Bain)
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