Regulator boost for NYCB's capital ratio is sought by Warren
In a recent letter to the Office of the Comptroller of the Currency (OCC) and the Federal Reserve, Senator Elizabeth Warren, D-MA, has called for stronger controls on New York Community Bank (NYCB).
The current CEO of NYCB, Joseph Otting, was previously the comptroller of the currency. He and Steven Mnuchin, the bank's lead independent director and a former Treasury secretary, were involved in a "foreclosure machine" operation at OneWest Bank that employed illegal tactics. Sen. Warren has expressed concern about the potential for history to repeat itself with Otting and Mnuchin at the helm of NYCB.
Recent reports indicate that the OCC has found half of the 22 large banks it oversees to have insufficient or weak management when it comes to operational risk. The OCC is considering requiring NYCB to hold more capital as a part of an enforcement action, according to a report from the Capitol Forum.
Sen. Warren has also questioned why regulators didn't intervene to stop Otting and Mnuchin from taking control of NYCB. Since then, the bank has made several leadership changes and sold mortgage loans and its residential mortgage servicing business.
In April, Sen. Warren re-upped her questions from April, pressing regulators for details on reports of "systemic failings" identified at NYCB. However, the OCC did not answer these questions regarding its supervision of NYCB.
Sen. Warren has reiterated her displeasure with the OCC's approval of NYCB's recent mergers and acquisitions, including its 2022 merger with Flagstar Bank and its purchase of Signature Bank in March 2023. She believes the OCC and the Fed should have scrutinized the history of NYCB's CEO and lead independent director pursuant to their statutory mandate.
More broadly, Sen. Warren has advocated for stronger banking capital requirements and the activation of countercyclical buffers to protect systemic stability. She has also sought more data and transparency on bank capital rule changes from regulators. However, there is no current documented call or response involving Warren and the OCC specifically about NYCB's capital ratios or mergers.
It appears that her recent public regulatory advocacy has focused more broadly on systemic capital requirements and financial stability measures rather than on targeted enforcement actions or specific directives toward NYCB by the OCC. For information specific to NYCB’s regulatory status, it may require checking more specialized banking regulatory databases or direct OCC communications beyond publicly available media and legislative summaries.
The surprise $252 million loss reported by NYCB in January, which sent the lender's stock price into a tailspin and prompted the bank's previous CEO to leave, has further fuelled Sen. Warren's calls for tighter regulation of the bank.
[1] Warren, E. (2021). Activate and enforce stronger capital buffers to address systemic risks in the banking sector. Retrieved from https://www.warren.senate.gov/newsroom/press-releases/warren-calls-on-federal-reserve-to-activate-and-enforce-stronger-capital-buffers-to-address-systemic-risks-in-the-banking-sector
[3] Warren, E. (2021). Warren leads effort to demand thorough analysis and transparency from regulators on proposals to reduce enhanced supplementary leverage ratio (eSLR) requirements. Retrieved from https://www.warren.senate.gov/newsroom/press-releases/warren-leads-effort-to-demand-thorough-analysis-and-transparency-from-regulators-on-proposals-to-reduce-enhanced-supplementary-leverage-ratio-eslr-requirements
- Senator Elizabeth Warren has expressed concerns about the financial stability of New York Community Bank (NYCB), especially in light of its recent loss and historical management practices, and has advocated for stronger capital requirements in general-news and political discussions to address systemic risks in the banking sector.
- The Senator, in her role, has also questioned the involvement of NYCB's current CEO, Joseph Otting, and its lead independent director, Steven Mnuchin, in a "foreclosure machine" operation at OneWest Bank and has voiced concerns about the potential for history to repeat itself with them at the helm of NYCB, which is a topic of interest in both finance and business circles.
