Acting Comptroller of the Currency Michael J. Hsu warned of the long-term risks that political polarization poses to the banking industry. Hsu expressed concerns about the fragmentation of the U.S. financial system due to cultural divisions, identity politics, and the politicization of finance. He noted that states are increasingly pressuring banks to take sides for symbolic reasons rather than based on sound policy, potentially leading to further fragmentation.
Hsu emphasized the importance of the Office of the Comptroller of the Currency (OCC) in safeguarding against this trend and maintaining unity within the banking system. He highlighted the OCC’s historical role in unifying a fragmented banking system in the 1800s and reaffirmed the regulator’s commitment to defending preemption. Hsu also identified two other significant long-term risks facing the banking industry: the growth of large banks and the increasing complexity of relationships between banks and nonbanks.
In conclusion, Hsu underscored the necessity for large banks to build strong foundations to ensure resilience, resolution, and manageability, in order to prevent repeating past mistakes. He also raised concerns about the challenges posed by the blurred lines between banking and commerce, pointing to the complexities and interdependencies between banks and nonbanks. Hsu’s remarks emphasize the need for regulatory vigilance and strategic management to navigate these emerging risks and sustain a stable and secure financial system.
