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2017-05-05 16:06:02
From the London Whale to Wells Fargo, a Bank Regulator Looks Back

Thomas J. Curry’s first week as a federal banking regulator was his worst.

Soon after taking over the Office of the Comptroller of the Currency, which polices some of the nation’s largest banks, Mr. Curry learned that JPMorgan Chase was racking up billions of dollars in losses on a risky derivatives trade in London.

The 2012 episode, known as the London Whale, exposed huge gaps in federal oversight of big banks. A few months after that, a Senate report cited the agency’s “systemic failures” that allowed a money-laundering scheme at HSBC “to fester and worsen.”

Five years and hundreds of millions of dollars in fines later — for JPMorgan, HSBC and others — Mr. Curry is known for overhauling the agency and its approach to bank regulation.

But on Friday, he will be gone. The Trump administration removed Mr. Curry from his role this week, nearly a month after his term expired, alarming Democratic lawmakers who fear a return to the days when the agency was more of a cheerleader than a watchdog.

The lawmakers, noting that President Trump has vowed to dismantle Obama-era financial rules, raised concerns about the administration’s choice to replace Mr. Curry. The Treasury Department announced this week that Keith Noreika, a longtime banking lawyer, would serve as acting comptroller until the president nominates a new one.

Senator Sherrod Brown, the top Democrat on the Banking Committee, called it “disturbing that the president is rushing to replace Mr. Curry with an acting appointee who has clear conflicts of interest.”

Whoever his formal successor might be — Joseph Otting, a former top executive at OneWest is reportedly under consideration — Mr. Curry’s departure signals the near-conclusion of Obama-era bank regulation, a period known for big fines and long rules, as well as lingering concerns about the culture of an industry that has faced its share of scandals. Mr. Curry’s departure follows the exit of Daniel K. Tarullo, the Federal Reserve official who led efforts to strengthen financial regulation.

Mr. Curry spoke to The New York Times this week about his tenure and the challenges that lie ahead for banking regulators in the Trump administration. Below are excerpts from the interview.

What did the London Whale episode do to shape your approach at the agency?

At the time, I think my head was spinning. But I really actually think it was a good thing.

It caused us to look at how could we be better and I think that was probably the defining reason that people — my management team here and the staff — bought into the need to get an external review of how we supervise. To actually examine how well we examine. That kind of got to be the road map to trying to make this a really stellar, what I hope and think is, a stellar bank supervisory agency. To my knowledge, no other regulator globally has ever done that.

You also removed some of the old-guard people at the agency who had a more deregulatory approach. And you installed people like Paul Nash, from the Federal Deposit Insurance Corporation, as top aides.

You need to have a shared vision. Like I said, the good part about having the London Whale and HSBC was you couldn’t argue that there wasn’t a problem that we needed to confront as an agency. I think people feel pretty good about the agency today and where we’re headed.

There’s the Volcker Rule and rules requiring banks to hold greater capital, but what was the idea behind your lesser-known “heightened standards” for bank executives and boards?

You need the rules — capital and liquidity requirements are essential. But what we provide is the ability to assess the risk management structures at institutions and corporate governance. What we did with heightened standards is basically said, “The bigger you are, the more we expect of you.”

You once told The Times that the relationship between your agency and the banks was akin to “a priest-penitent relationship.” Have the banks gotten any better at confessing their sins?

Ideally, we want the bank to find these things first. The industry is getting much better at that. Nobody is perfect yet.

You also pushed for a culture change in your own agency, and yet you released a damning report last month in which the agency acknowledged that its oversight of Wells Fargo during the whole fake account scheme was “untimely and ineffective.”

I think we’ve made great progress. To be a strong organization requires you to take a look at yourself and your actions. To learn from it. That really was why I thought it was important to do the lessons learned review — and also painful as it may be to our pride — to do it publicly. Again, I don’t see any other agencies taking a problem by the horns, acknowledging it and then doing something about correcting it.

Are you worried about your successor unwinding the new regulatory approach?

I don’t think anyone wants to repeat the mistakes of the past. You need a sound rule book, and then you need highly trained professionals, dedicated supervisors to make an assessment of how well [the banks] are adhering to that framework. I think you can play around on the edges but as long as you have those key elements in place you have a good system.

How much of a surprise was it when you got the call this week from the Trump administration?

My term ended in early April. I offered to stay on as long as the administration wanted me. I live in Boston and I have a rented apartment here. I told people I went month-to-month on my apartment and I was month-to-month on the comptroller’s job.

Any advice for the next guy?

You really have to be prepared for the next downturn. At the end of the day, you can’t stop banks from making mistakes on individual loans. It’s not our job. But it is our job to make sure that the banks are safe and sound and the system itself is stable.