Manatt Partner Discusses OCC Guidance on Banks' Independent Consultants

"OCC Outlines Expectations When Banks Are Required to Employ Independent Consultants"
Bank Safety & Soundness Advisor

December 16, 2013 - Manatt's Mick Grasmick, a partner in the firm's Financial Services & Banking Practice, spoke to Bank Safety & Soundness Advisor about a recent Office of the Comptroller of the Currency (OCC) bulletin that provides guidance on agency expectations in cases where banks are required to employ independent consultants as part of enforcement actions.

Bank Safety & Soundness Advisor reports that regulators are raising the bar on the outside consultants who help banks comply with enforcement orders, meaning there will be new duties and obligations on the banks that have to hire and pay the consultants. The bulletin covers the selection of third-party consultants and the level of monitoring and review that the OCC will conduct to ensure consultants are doing their job. Requirements of expertise, resources and independence are outlined, and industry insiders think that the criteria may make the selection of lower-cost and off-brand consultants risky.

"You are almost forced in many cases to buy the brand approved by the regulators rather than do your own approach with folks that may be fine or even better," said Grasmick,.

While hiring a proven and quality consultant is important, he added, banks and regulators should not lose sight of the ultimate goal of the engagement, which is to put an institution on a sound footing going forward. Not infrequently, banks and their highly-paid consultants conclude an engagement, but are unable to get the blessing of regulators, who have questions about the sustainability of the changes made.

"I thought the guidance was a little unnecessarily focused on what is part of the solution but not necessarily the driver of what the enforcement orders are supposed to be achieving," Grasmick said. "A consultant doesn't change the culture and the compliance and the follow-through. The board and the senior management of the bank have to do that," he added.