OCC
Bank charter gatekeeper: national charters grant federal preemption of state laws. Fintech charter battle shows the real prize—defining 'bank' means controlling who escapes state regulation.
The OCC's real power isn't bank supervision—it's definitional control over what counts as a 'bank.' National bank charters come with federal preemption, exempting institutions from state usury caps, licensing requirements, and consumer protection laws. This makes the OCC the gatekeeper to regulatory arbitrage. The fintech charter controversy revealed this dynamic: companies like PayPal sought national charters not to become banks, but to escape the patchwork of 50 state regulatory regimes. State regulators sued, arguing that deposit-taking is fundamental to banking and non-depository fintechs shouldn't get preemption privileges. The courts agreed—for now. But the fight continues because the stakes are existential: whoever defines 'bank' controls which rules apply. Founded in 1863 to create a national currency during the Civil War, the OCC supervises roughly 1,000 national banks holding about 70% of US commercial banking assets. Unlike most federal agencies, it receives no Congressional appropriation—funding comes entirely from assessments on supervised banks. This financial independence cuts both ways: freedom from budget politics, but potential capture by the entities paying the bills. The OCC's 2025 supervision priorities focus on BSA/AML compliance and operational resilience, but its lasting impact comes from charter decisions that reshape competitive boundaries for decades.
The OCC receives zero Congressional appropriation—it's entirely funded by assessments on the banks it supervises, creating both regulatory independence and potential alignment of interests with regulated entities.
Key Facts
Power Dynamics
Charters, regulates, and supervises national banks and federal savings associations; can approve or deny mergers, branches, and new activities
Charter decisions determine which institutions get federal preemption of state laws—a competitive advantage worth billions in avoided compliance costs
- Comptroller of the Currency (sole decision-maker on charter approvals)
- Federal courts (can strike down charter expansions as ultra vires)
- Congress (can amend National Bank Act to restrict OCC authority)
- FDIC (insures deposits of national banks OCC charters)
- Federal Reserve (monetary policy affects bank profitability)
- State banking regulators (compete for charters; coordinate on supervision)
- Treasury Department (OCC is a Treasury bureau)
Revenue Structure
OCC Revenue Sources
- Semi-annual assessments on supervised banks (based on assets) 85% →
- Fees for charter applications, licensing, and examinations 10% ↻
- Interest on investments 5%
Bank consolidation reduces number of supervised entities; large bank failures could trigger political scrutiny of assessment-funded independence
Unlike appropriated agencies, OCC can hire examiners without Congressional approval but faces accusations of regulatory capture
Decision Dynamics at OCC
Emergency licensing during 2008 crisis—Bear Stearns entities converted in days
Fintech charter litigation: OCC announced plan in 2016, still contested in 2025
Charter decisions with preemption implications get litigated, extending timelines by years
Failure Modes of OCC
- 1980s S&L Crisis: OCC-supervised banks performed better than thrifts, but criticism of lax supervision persisted
- 2008 Financial Crisis: National banks at center of mortgage crisis; OCC accused of preemption-enabled predatory lending
- 2016-present: Fintech charter repeatedly blocked by courts, limiting OCC expansion
- Assessment funding creates dependence on large bank fees—concentrated revenue from JPMorgan, Wells Fargo, Citi, BofA
- Preemption power invites regulatory arbitrage and state regulator turf wars
- Career incentives: examiners often move to supervised banks, creating revolving door
Major national bank failure traced to OCC supervision gaps could trigger Congressional investigation of assessment-funded independence model
Biological Parallel
The cleaner wrasse occupies a unique ecological niche by defining the terms of interaction—client fish must accept cleaning station rules to receive parasite removal. Similarly, OCC defines who qualifies as a 'bank' and thus who receives preemption privileges. The fintech charter battle shows competitors trying to access the cleaning station without accepting traditional banking obligations, while incumbent fish (state regulators) defend their territory.