Business, Legal & Accounting Glossary
The Office of Thrift Supervision (OTS), an agency of the United States Department of the Treasury, is the primary regulator of federal savings associations (sometimes referred to as federal thrifts). Federal savings associations include both federal savings banks and federal savings and loans. The OTS is also responsible for supervising savings and loan holding companies (SLHCs) and some state-chartered institutions.
The OTS was established by Congress as a bureau of the Department of the Treasury on August 9, 1989, as part of the Financial Institutions Reform, Recovery and Enforcement Act of 1989.
OTS is unique among the federal bank regulatory agencies in that it supervises holding companies as well as thrift institutions. This results in OTS providing consolidated supervision for such well-known firms as General Electric (GE), AIG, Inc., Ameriprise Financial, American Express, Morgan Stanley, Merrill Lynch and Lehman Brothers. OTS’s consolidated supervision program for GE, AIG Inc., and Ameriprise has been recognized as “equivalent” by the European Union — allowing these firms to operate their financial businesses in the EU without forming an EU holding company and submitting to supervision in the EU.
The OTS has regional offices in Atlanta, Dallas, Jersey City, San Francisco, and Chicago.
Other regulatory agencies like the OTS include the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Federal Reserve, and the National Credit Union Administration.
The original national banking laws essentially forbade national banks from making residential mortgage loans. Savings institutions—variously known as savings and loans, savings banks, and building associations—helped fill the gap. The U.S. thrift industry’s roots date back to 1831, when townspeople in Frankford, Pennsylvania, agreed to pool their money to purchase their own homes. The result was The Oxford Provident Building Association, which lasted until all 40 original members had been given the opportunity to become homeowners. The Oxford’s example of cooperative finance to promote homeownership inspired the founding of other associations across the country. By 1893, there were nearly 6,000 such institutions in the United States.
The Great Depression brought a wave of foreclosures and thrift institution failures. In response, Congress created a federal thrift charter, administered by the Federal Home Loan Bank Board and funded by the Federal Home Loan Bank System, and the Federal Savings and Loan Insurance Corporation to protect thrift depositors. This structure remained in place for the next half-century. At their height, savings institutions originated two-thirds of the nation’s home mortgages.
The deregulation of financial markets in the 1970s and 1980s threatened the thrift business model, which depended on low-cost retail deposits. Congress broadened thrift powers, which led many institutions to venture into riskier investment and lending activities. In the late 1980s and the 1990s, hundreds of savings institutions failed. To revive and supervise the struggling industry, the Office of Thrift Supervision (OTS) was created under the Treasury Department to replace the independent Federal Home Loan Bank Board. During its more than 20 years, the OTS regulated institutions that helped millions of Americans achieve the dream of homeownership.
Established by Congress as a bureau of the Department of the Treasury on August 9, 1989, OTS charters, examines, supervises, and regulates federal savings associations insured by the Federal Deposit Insurance Corporation (FDIC). OTS’s primary statutory authority is the Home Owners’ Loan Act originally enacted in 1933. OTS also examines, supervises, and regulates state-chartered savings associations insured by the FDIC and provides for the registration, examination, and regulation of savings and loan holding companies (SLHCs) and other affiliates.
The thrift charter has several unique characteristics including nationwide branching under a single charter, a holding company structure offering a single regulator for the holding company and its subsidiary depository institution, and authority to preempt state laws and regulations that impose non-uniform requirements. OTS is the only federal-banking agency that both charters depository institutions and supervises their holding companies. The holding companies are diverse, ranging from large, multinational corporations to small companies with few assets other than their thrift charter.
OTS was headquartered in Washington, D.C. with five regional offices located in Jersey City, Atlanta, Chicago, Dallas, and San Francisco. The headquarters office develops nationwide policies and programs for the agency and coordinates the operations of OTS. The regional offices examine and supervise institutions and process most corporate applications. Approximately 75 per cent of OTS’s staff of nearly 1,000 employees work in the regions.
The President, with Senate confirmation, appoints OTS’s Director for a five-year term. OTS’s Director also serves as a member of the Board of Directors of the FDIC, a member of the Federal Financial Institutions Examination Council (FFIEC), and a director of NeighborWorks® America.
OTS receives no appropriated funds from Congress. The income of the bureau is derived principally from assessments on savings associations and their holding companies. OTS’s budget supports its strategic and performance goals that provide for proactive supervision of the thrift industry, reduced regulatory burden, and ongoing credit availability. OTS tailors supervisory examinations to the risk profile of regulated institutions and holding companies under its jurisdiction, while effectively allocating resources to oversee and assess the performance record of the thrift industry. OTS faces the following key strategic issues and challenges:
To perform, and to be recognized, as the premier regulator of financial institutions and holding companies.
To supervise savings associations and their holding companies in order to maintain their safety and soundness and compliance with consumer laws and to encourage a competitive industry that meets America’s financial services needs.
These principles guide the mission and operations of OTS and support our core values:
The Office of Thrift Supervision (OTS) was created when the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) abolished the Federal Home Loan Bank Board (FHLBB) and transferred all examination and supervisory activities to OTS under the Department of the Treasury.
The primary functions of OTS are to:
FIRREA provides that OTS assess the institutions it regulates to recapture operating costs. Assessments are collected semiannually on January 31 and July 31.
On July 21, 2010, the President signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act, which includes the Enhancing Financial Institution Safety and Soundness Act of 2010 (the “Act”). The Act abolishes OTS and transfers its duties to the Office of the Comptroller of the Currency (OCC), the Federal Reserve and the Federal Deposit Insurance Corporation (FDIC) on July 21, 2011 (the “transfer date”). Under the Act, the transfer of OTS functions to the OCC includes rule-making authority, personnel, property and funds relating to Federal savings associations.
Upon enactment of the Act, the OTS must pay the OCC for such amounts the OCC determines necessary for expenses associated with the transfer of functions, including the expenses for personnel, property and administrative services, during the period beginning on the date of the enactment of the Act and ending on the transfer date.
OTS has historically prepared its financial statements in accordance with generally accepted accounting principles based upon accounting standards issued by the Financial Accounting Standards Board (FASB), the private-sector standards-setting body. In October 1999, the American Institute of Certified Public Accountants designated the Federal Accounting Standards Advisory Board (FASAB) as the standards-setting body for financial statements of federal government entities with respect to the establishment of generally accepted accounting principles. FASAB has indicated, in the Statement of Federal Financial Accounting Standards (SFFAS) No. 34 “The Hierarchy of Generally Accepted Accounting Principles, Including the Application of Standards Issued by the Financial Accounting Standards Board,” that financial statements prepared based upon accounting standards published by the FASB may also be regarded as being in accordance with generally accepted accounting principles for those federal entities such as OTS that have issued financial statements based upon FASB accounting standards in the past. Accordingly, consistent with historical reporting, OTS financial statements are presented in accordance with accounting standards published by FASB.
OTS
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This glossary post was last updated: 11th August, 2022 | 0 Views.