Acting Comptroller of the Currency Michael Hsu said Thursday that the agency is seeking public comment on a forthcoming survey on customer trust in their banks, a move that will allow banks, regulators and stakeholders to “hold each other accountable for safeguarding trust in … the banking system.”
Speaking in Chicago at an event sponsored by the Woodstock Institute, Hsu defined trust as “the willingness of a party to be vulnerable to the actions of another,” sand said it is not only fundamental to banking relationships, but also critical for ensuring people do not turn to riskier and less-regulated bank-like products that can harm their financial well-being.
“There is a saying that what gets measured gets done,” Hsu said. “By conducting an annual survey on trust in banking, my hope is that banks, regulators, and community organizations will be better able to hold each other accountable for safeguarding trust in banks and the banking system. Customers who trust banks are more likely to use the regulated banking system rather than stashing their cash under their mattresses, relying on predatory lenders, or turning to alternatives like crypto.”
Hsu noted a major priority in OCC’s efforts to address fairness will be understanding the scale and nature of the problem. That requires more comprehensive research and data on trust in banking, he said, and “bank regulatory agencies, central banks, and academics have tended to focus on specific segments of the population or have covered trust in banks tangentially as part of broader survey efforts.”
To address the research gap, the OCC has issued a Request for Information Thursday to solicit public comments on its forthcoming annual survey exploring trust in banking and supervision, an effort established under the OCC’s 2023-2027 strategic plan.
“The RFI seeks public input on the possible scope of the survey, components and drivers of trust, and ways to assess and analyze survey results over time,” Hsu said. “We value diverse stakeholder feedback and encourage you and others to respond to the RFI during the comment period, which extends into August.”
Hsu renewed his call for the banking industry to consider trust and fairness in banking, lack of which he said can hurt a firm’s financial well-being, and in some cases, warrant regulatory action.
“Aggregate levels of deposits at banks that endure runs do not return to pre-run levels,” Hsu said. “In addition, banks that have material fairness and compliance deficiencies may face stiff civil money penalties, restrictions on growth, and sustained reputational damage, limiting their capacities to make loans and otherwise serve their customers and the economy.”
Hsu also touched on the OCC’s efforts at revamping its implementing regulations for the Community Reinvestment Act. He expressed concern about a 2022 analysis by the Urban Institute that found CRA-eligible mortgage and small business lending banks disproportionately lend in their CRA areas, leaving low- and moderate-income areas without a bank underserved.
“We must continue to encourage banks to do a better job of offering products and services and serving all communities fairly, especially LMI communities,” he said to the crowd.
Hsu also reiterated the need to reform banks’ overdraft fee practices and reminded institutions to familiarize themselves with April issued guidance on overdraft protection programs highlighting practices that OCC has indicated may border on unfair or deceptive like assume positive/settle negative and representment fees.
“In times of need, access to small dollar liquidity can be critical,” Hsu said. “Over the years, overdrafts have grown to meet that need, but at a high cost to consumers and to trust in banks.”
The OCC plans to publish the main survey results in a report, enabling policymakers, bankers, and researchers to stay informed about the trends and drivers of consumer trust in the industry. Additionally, the OCC said it may produce more detailed reports on specific trust-related topics.
By gathering insights from the public on how to structure the forthcoming survey, the agency said it aims to identify areas where trust can be further strengthened, and accurately gauge consumer trust in banking.
Comments on the agency’s Request for Information must be received within 120 days after June 9, when it was published in the Federal Register.