Detailed Information on the
National Bank Supervision Assessment

Federal banking regulatory agencies, including the OCC, the OTS, the NCUA, the Federal Reserve, and the FDIC, will work together to align outcome goals and related measures to allow for greater comparison of program performance in the industry.

Measure: Percentage of National banks with high ratings according to industry standards (composite CAMELS rating of 1 or 2) (Performance measure was adopted in 2002)

Explanation:

Measure: Percent of problem banks rehabilitated, as measured by industry standards (Performance measure was adopted in 2002)

Explanation:

Measure: Annual Measure: Percent of national banks that are well capitalized (Performance measure was adopted in 2002)

Explanation:

Is the program purpose clear?

Explanation: The Office of the Comptroller of the Currency (OCC) charters, regulates and examines approximately 2,200 national banks and 52 federal branches of foreign banks in the U.S., accounting for more than 54 percent of the nation's banking assets. Its mission is to ensure a safe and sound and competitive national banking system that supports the citizens, communities and economy of the United States.

Evidence: OCC's Strategic Plan 2000-2005 articulates the program purpose clearly.

Does the program address a specific interest, problem or need?

Explanation: The program is designed to address the safety and soundness of the national banking system and the maintenance and integrity of the Bank Insurance Fund (FDIC deposit insurance).

Evidence: Banks regulated by the OCC account for more than 54 percent of the nation's banking assets.

Is the program designed to have a significant impact in addressing the interest, problem or need?

Explanation: OCC charters and is the primary federal regulator of national banks.

Evidence: 2,800 OCC employees supervise approximately 2,200 national banks accounting for more than 54 percent of the nation's banking assets.

Is the program designed to make a unique contribution in addressing the interest, problem or need (i.e., not needlessly redundant of any other Federal, state, local or private efforts)?

Explanation: OCC is the primary regulator of national banks. However, FDIC performs limited supervision of national banks. Other depository institutions are regulated by a complex, overlapping structure of Federal and State agencies. Other agencies, including the Office of Thrift Supervision (OTS), the Federal Deposit Insurance Corporation (FDIC), National Credit Union Administration (NCUA) and the Federal Reserve Bank (FRB), perform similar types of regulatory functions in the banking industry.

Evidence: OTS Strategic Plan, NCUA Strategic Plan, and FDIC Strategic Plan all reflect similar regulatory functions as OCC.

Is the program optimally designed to address the interest, problem or need?

Explanation: The OCC approach to bank supervision -- supervision by risk -- results in effective and efficient bank supervision. The Supervision by Risk model has been replicated by other bank regulatory agencies. OCC's primary funding source (fee assessments on total assets of national banks) imposes a level of financial management discipline that requires the OCC to conduct bank supervision in an efficient and effective manner. By comparison, the funding sources of some other federal bank regulators are not constrained and do not necessitate a similar level of financial management discipline.

Evidence: Bank Supervision Process booklet of the Comptroller's Handbook; Large Bank Supervision booklet of the Comptroller's Handbook; Community Bank Supervision booklet of the Comptroller's Handbook; Reforming the Funding of Bank Supervision (www.occ.treas.gov/reformfunding.pdf).

Does the program have a limited number of specific, ambitious long-term performance goals that focus on outcomes and meaningfully reflect the purpose of the program?

Explanation: The OCC has established three long term strategic goals for the organization. These goals directly support the OCC's mission of, "Charter, regulate and supervise national banks to ensure a safe, sound and competitive banking system that supports the citizens, communities, and economy of the United States." These goals focus on the desired state of the national banking system in protecting the financial assets and meeting the needs of the American public. A fourth, enabling goal reflects the desired management attributes for the agency as it accomplishes its mission. The specific outcomes that demonstrate achievement of these long term goals are established in the Annual Performance Plan and are discussed under Question 2 below.

Evidence: OCC published its 2000-2005 Strategic Plan that includes the four long term strategic goals for the organization. The goals are: 1) A safe and sound national banking system; 2) A flexible legal and regulatory framework that enables the national banking system to provide a full competitive array of financial services; 3) Fair access to financial services and fair treatment of bank customers; and, 4) An expert, highly motivated and diverse workforce that makes efficient use of OCC resources. Performance goals and measures are established in the FY 2003 Performance Plan.

Does the program have a limited number of annual performance goals that demonstrate progress toward achieving the long-term goals?

Explanation: The OCC implemented a new set of goals and measures for FY 2003 that are more outcome-oriented and better reflect achievement of the long term, strategic goals of the agency. The annual performance goals state the actual and targeted performance and outcomes for specific time periods. The annual performance goals are linked to Treasury's strategic goals, OCC's strategic goals, and also OCC's major programs. The performance goals are supported by a balanced set of measures considering program results, customer satisfaction and employee satisfaction. Several of OCC's performance goals relate to improving efficiency. OCC also has adopted operational measures that are used internally to track organizational performance and guide decision making. OCC has revised its measures several times since the early 1990s, so it lacks the consistency of performance data to show continuous improvement from an external perspective. Although new measures have been adopted, old measures remain important as operational data that the OCC continues to monitor.

Evidence: The OCC publishes its Annual Performance Plan as part of Treasury's Congressional budget. The FY 2003 performance goals relative to OCC's mission are: 1) Achieve effective rehabilitation of problem national banks; 2) Maintain a well-capitalized national banking system; 3) Maintain a safe and sound national banking system through effective supervision; 4) Maintain a national banking system that is responsive to community development opportunities; 5) Maintain a national banking system that effectively complies with consumer laws and regulations; 6) Facilitate the timely and effective resolution of consumer complaints; 7) Increase the number of institutions that use the Internet to file licensing applications; 8) Complete licensing decisions in a timely, effective and professional manner; and, 9) Issue external legal opinions within established timeframes.

Do all partners (grantees, sub-grantees, contractors, etc.) support program planning efforts by committing to the annual and/or long-term goals of the program?

Explanation: Since regulated entities are not necessarily considered program partners, it is not apparent that the OCC has partners in the context of this question. The OCC does contract with a small number of personnel and they do share OCC's goals.

Evidence: N/A.

Does the program collaborate and coordinate effectively with related programs that share similar goals and objectives?

Explanation: OCC has joined other financial institution regulatory agencies as part of the Federal Financial Institutions Examination Council (FFIEC) in an effort to develop common examination policies and procedures. OCC's strategic goals and measures, however, are not coordinated with those of other financial regulatory agencies. Similar goals and measures need to be developed in order to better compare agency outcomes.

Evidence: Office of the Inspector General's (OIG) 2002 review entitled "Joint Evaluation of the Federal Financial Institutions Examination Council" concluded that the FFIEC is accomplishing its mission of prescribing uniform principles, standards, and report forms and is achieving coordination between the banking agencies. The report further concluded that the FFIEC and the banking agencies have issued guidance responsive to the major risks and emerging issues facing the industry between 1997 and 2001 (the period of the study) and had achieved uniformity in critical areas such as common examination rating systems and standard quarterly financial reports submitted by insured institutions (see report pages 5, 6, 10-14). FFIEC annual reports; joint interagency bank supervision conferences; OCC strategic plan.

Are independent and quality evaluations of sufficient scope conducted on a regular basis or as needed to fill gaps in performance information to support program improvements and evaluate effectiveness?

Explanation: The OIG conducts reviews of the supervision process. The OIG also conducts a review to determine the reasons for the failure and steps to be taken to prevent recurrence when there is a material loss to the Bank Insurance Fund due to the failure of a national bank. OCC takes prompt corrective action to address the findings. The OIG conducts follow-up audits to determine the effectiveness of the OCC's actions.

Evidence: OIG audit plan, Material Loss Report on Keystone, QA reports, OIG audit report, ITC system reports.

Is the program budget aligned with the program goals in such a way that the impact of funding, policy, and legislative changes on performance is readily known?

Explanation: In FY 2001, the budget was first aligned to program areas. Employees allocate their time to these programs. In FY 2002, OCC will have program expenditure data for an entire fiscal year. Actual FY 2002 expenditures, operating plans and program results were considered in the deliberation and final approval of the FY 2003 budget. Additionally, OCC has aligned its performance measures by program. As the OCC is better able to align inputs to outputs/outcomes, the impact of funding, policy and legislative changes will be more readily known in the future.

Evidence: PPM-3130-20, OCC Budget Process; initial budget requests; one-on-one business unit sessions; operating plans & measures; one-on-one Comptroller sessions; passbacks; appeals; responses to appeals; and, the final approved budget.

Has the program taken meaningful steps to address its strategic planning deficiencies?

Explanation: The OCC recently revised its measures to better reflect achievement of its strategic goals. Additionally, the FY 2003 budget process included a collaboration between the budgeting, planning, and evaluation staffs working with the program staffs to develop the budget. The OCC is planning to develop its FY 2003-2008 Strategic Plan with the primary purpose of considering industry trends and internal and external environmental issues to provide a future profile of the agency over the next five to seven years. This concerted effort to update the long range vision for the organization will further enhance strategic planning at the OCC.

Evidence: FY 2004 Annual Performance Plan.

Are all regulations issued by the program/agency necessary to meet the stated goals of the program, and do all regulations clearly indicate how the rules contribute to achievement of the goals?

Explanation: All regulations issued by OCC include a specific purpose related to statutory requirement or the OCC Strategic Plan. Purposes may be more narrowly described in regulations than stated goals in the strategic plan. However, each rulemaking project is tracked in the Chief Counsel's Project Tracking System, and relevant agency goals are identified for each rulemaking.

Evidence: Text of Rulemakings; Rulemaking project entries in Chief Counsel Project Tracking System; OCC Strategic Plan; OCC Bulletin 97-8, "OCC Standards for Developing Regulations"; OCC Regulation Review Report Card, OCC (December 1996).

Does the agency regularly collect timely and credible performance information, including information from key program partners, and use it to manage the program and improve performance?

Explanation: OCC gathers timely and credible performance data on its performance measures semiannually. The data is reported internally to the OCC's Executive Committee and externally, through the Department in both the Annual Performance Plan and the Annual Performance (& Accountability) Report.

Evidence: Definitions for each performance measure, how the performance data is captured and how it is verified and validated are established in the OCC's Annual Performance Plan. The OCC's FMFIA process is used to ensure managers controls over performance data are operating as intended.

Are Federal managers and program partners (grantees, subgrantees, contractors, etc.) held accountable for cost, schedule and performance results?

Explanation: The OCC identifies managers responsible for achieving key program results. Through the administration of OCC's performance management program, all OCC employees have established performance standards. Each manager has an annual performance plan with goals and objectives tied to OCC's mission and strategic plan. In addition, each manager completes an annual self-assessment of their program responsibilities (SAM).

Evidence: PPM - 3110-28, Performance Management Program, Self-Assessments for Managers.

Are all funds (Federal and partners') obligated in a timely manner and spent for the intended purpose?

Explanation: OCC adopted strict budget formulation and execution processes similar to those followed by appropriated agencies. It has established a funds control process to track the Budget Authority approved by the Comptroller and ensure its use for the intended purposes. The DCFO and the budget contacts in the functional units monitor daily the usage of approved funds and the DCFO reports monthly on the status of funds to the Comptroller and the Executive Committee.

Evidence: Monthly Financial Status briefings to the Executive Committee with reviews of obligation rates; PPM-1000-14, Special and Contingency Reserves.

Does the program have incentives and procedures (e.g., competitive sourcing/cost comparisons, IT improvements) to measure and achieve efficiencies and cost effectiveness in program execution?

Explanation: The OCC does not currently have fully developed mechanisms to measure efficiencies on a global agency basis. However, the Comptroller recently instilled a Program and Management Accountability (P&MA) division within the OCC to provide assurance that programs meet mission requirements and are administered in an efficient and effective manner and resources are protected from waste, fraud, and mismanagement. P&MA ensures that accountable management officials establish and maintain a set of cost-effective management controls over program/organizational unit performance; encourage organizational performance excellence through a regular program of quality reviews; ensure that OCC programs align with strategies/priorities by analyzing the OCC's budget and providing input into the strategic planning process; and evaluate the efficiency and effectiveness of programs and recommends alternatives or solutions.

Evidence: N/A.

Does the agency estimate and budget for the full annual costs of operating the program (including all administrative costs and allocated overhead) so that program performance changes are identified with changes in funding levels?

Explanation: OCC budgets for all direct and indirect costs of operating its programs. All direct and indirect costs are estimated and expensed at both major object class (MOC) and budget object class (BOC) levels. Beginning in FY 2002, OCC's general and administrative expenses will be allocated to its four mission-related programs which are subject to review by independent public accountants.

Evidence: PPM-3130-20 OCC Budget Process; FY 2003 approved budget; FY 2002 Statement of Net Cost (draft prepared for period ending May 31, 2002).

Does the program use strong financial management practices?

Explanation: In addition to the practices discussed in 3. above, OCC follows generally accepted accounting principles applicable to Federal entities, and went live on October 1, 2001 with a new financial management system certified by the Joint Financial Management Improvement Program (JFMIP). The Treasury's Office of Inspector General oversees an annual audit of OCC's financial statements conducted by an Independent Public Accountant. OCC's financial statements, which are prepared following OMB guidance, have earned an unqualified (clean) opinion, with no material weaknesses or conditions of noncompliance with laws and regulations. OCC closes its monthly financial records and transmits the results to the Department of the Treasury within three working days of the end of the month.

Evidence: $MART system documentation; FY 2001 Annual Report; Monthly TIER submissions for FY 2002.

Has the program taken meaningful steps to address its management deficiencies?

Explanation: OCC established the Program and Management Accountability division (P&MA) comprised of three units: Quality Management, Program Analysis, and the OIG/GAO Liaison function. The division's primary mission is to provide assurance that programs meet mission requirements and are administered in an efficient and effective manner and resources are protected from waste, fraud, and mismanagement. Meaningful steps to address management deficiencies include the Self Assessment for Managers (SAM) process and the implementation of $MART and it's related Asset Management system.

Evidence: PPM 1000-12 -- Management Accountability; Self Assessment for OCC managers administered by the Program and Management Accountability division; March 2002 Quarterly Journal, Annual Report of Operations; $MART System documentation.

Did the program seek and take into account the views of affected parties including state, local and tribal governments and small businesses, in drafting significant regulations?

Explanation: For Advanced Notices of Proposed Rulemakings and Notices of Proposed Rulemakings, the process of soliciting views of affected parties in the drafting process is formalized. For other rulemakings, views may be solicited through the Comptroller and other senior management outreach with interested groups and through piloting regulatory changes under consideration.

Evidence: ANPRs for OCC's E-Banking and Debt Cancellation rules; schedule of Comptroller and Chief Counsel meetings with bankers, bank associations and customer and community groups; documentation of Lending Limit pilot and results; OCC Bulletin 97-8, "OCC Standards for Developing Regulations"; OCC PPM 1000-10, "Policy Review and Approval Procedures."

Did the program prepare, where appropriate, a Regulatory Impact Analysis (RIA) that comports with OMB's economic analysis guidelines and have these RIA analyses and supporting science and economic data been subjected to external peer review by qualified specialists?

Explanation: OCC normally does not issue regulations that meet threshold criteria requiring a Regulatory Impact Analysis. For any regulations that meet the criteria, a Regulatory Impact Analysis will be prepared.

Evidence: OCC Rulemakings.

Does the program systematically review its current regulations to ensure consistency among all regulations in accomplishing program goals?

Explanation: The last complete regulatory review was completed 1993-1996, and a schedule is currently being established by the FFIEC for a complete regulatory review by 2006, to meet EGRPRA requirements. The OCC also reviews regulations at the initiation of the Comptroller or Chief Counsel to ensure regulatory consistency in accomplishing goals.

Evidence: OCC Strategic Plan; "Measuring the Effectiveness of the OCC's Regulation Review Program," OCC, (July 1998); Part 24 and e-Corp rulemaking projects entries in Chief Counsel's Project Tracking System; OCC Bulletin 97-8 "OCC Standards for Developing Regulations."

In developing new regulations, are incremental societal costs and benefits compared?

Explanation: "While the OCC takes into account costs and benefits when developing and issuing new regulations, formal cost-benefit analyses are not routinely performed on proposed rules. The OCC frequently solicits comments on burden and cost through proposed rules. When cost benefit analysis data are provided by commenters, the OCC considers those analyses along with other comments as part of its public comment process. "

Evidence: OCC Bulletin 97-8 "OCC Standards for Developing Regulations"; OCC PPM 1000-10, "Policy Review and Approval Procedures"; text of proposed rulemakings; "Measuring the Effectiveness of the OCC's Regulatory Review Program, OCC (July 1998).

Did the regulatory changes to the program maximize net benefits?

Explanation: The OCC balances costs and benefits in developing and issuing new regulations, for example between safety and soundness, a competitive banking environment, and protection of consumers.

Evidence: OCC Bulletin 97-8 "OCC Standards for Developing Regulations"; OCC PPM 1000-10, "Policy Review and Approval Procedures";" Measuring the Effectiveness of the OCC's Regulatory Review Program," OCC (July 1998); OCC Regulation Review Report Card, OCC (December 1996).

Does the program impose the least burden, to the extent practicable, on regulated entities, taking into account the costs of cumulative final regulations?

Explanation: Each proposed rulemaking identifies proposed new requirements and requests comment on implementation burden, especially for community banks. Comments are considered during OCC's comment analysis process. Consistency and interaction among regulations are considered during regulatory review programs. The OCC also seeks other ways to reduce regulatory burden on the national banks and federal branches it supervises. Through CAGnet, available through NationalBankNet, participating national banks can receive and respond electronically to customer complaints received through the OCC's Ombudsman's office. The OCC has several initiatives that seek to utilize electronic data collection through NationalBankNet and reduce the administrative burden. Additionally, OCC participates with other federal bank regulatory agencies in using joint regulatory reporting forms (call report) to minimize burden. The agencies have adopted electronic call report filing.

Evidence: OCC Bulletin 97-8 "OCC Standards for Developing Regulations"; text of proposed rulemakings; "Measuring the Effectiveness of the OCC's Regulation Review Program," OCC, (July 1998), Call Report Instructions, CAGnet.

Has the program demonstrated adequate progress in achieving its long-term outcome goal(s)?

Explanation: To demonstrate achievement of OCC's long term goals, the most comprehensive performance measures from the FY 2003 performance plan were selected. Since these measures were established for FY 2003, actual results have not been reported externally but the data was gathered to establish the annual targets and is available internally. To respond to this question, OCC selected a few performance measures as established in the FY 2003 Performance Plan and provided actual results for FY 2001.

Evidence: FY 2003 Annual Performance Plan and internal documentation of 2001 results.

Does the program (including program partners) achieve its annual performance goals?

Explanation: In FY 2001, OCC had 7 performance goals and measures in the department's annual performance plan. OCC met or exceeded 5 of 7 of its targets. One of the unmet measures was non-mission related. The other unmet measure was an operational/process measure and did not adversely affect progress on OCC's long term goals. To respond to this question, OCC selected a few performance measures as established in the FY 2003 Performance Plan and provided actual results for FY 2001.

Evidence: FY 2001 Annual Performance Report; FY 2003 Annual Performance Plan; Internal documentation of FY 2001 actual results.

Does the program demonstrate improved efficiencies and cost effectiveness in achieving program goals each year?

Explanation: During FY 2002, OCC reviewed more than the goal of 5% (14 positions) of its FAIR Act positions for potential outsourcing. OCC determined that there was no cost advantage to outsourcing the 20 management services positions reviewed. Additionally, the number of management services staff required to support OCC operations has been reduced over the past few years.

Evidence: A-76 reviews conducted during FY 2002 and; Office of Management Staffing Plan.

Does the performance of this program compare favorably to other programs with similar purpose and goals?

Explanation: It is impossible to compare program performance until the financial regulatory agencies better align outcome goals and related measures.

Evidence:  

Do independent and quality evaluations of this program indicate that the program is effective and achieving results?

Explanation: In material respects, OIG audits do not find systemic or major deficiencies. The audits address finite pieces of an overall program and individual instances of apparent lapses in effective supervision. Internal quality reviews indicate that the program is effective.

Evidence: OIG audit plan, MLR on Keystone, QA plans and reports, OIG audit report, ITC system reports, Comptroller's Annual Assurance Certification.

Were programmatic goals (and benefits) achieved at the least incremental societal cost and did the program maximize net benefits?

Explanation: The OCC balances costs and benefits in developing and issuing new regulations, for example between safety and soundness, a competitive banking environment, and protection of consumers.

Evidence: "Measuring the Effectiveness of the OCC's Regulation Review Program," OCC, (July 1998); OCC Bulletin 97-8 "OCC Standards for Developing Regulations; OCC Regulation Review Report Card, OCC (December 1996).