Dive Brief:
- The Office of the Comptroller of the Currency has ordered Comerica Bank & Trust’s board to establish a compliance committee, as part of an enforcement action against the bank, the agency announced Thursday.
- The OCC discovered unsafe or unsound practices at the Dallas-based bank, including those related to its risk governance framework and internal controls. Under the agreement, the bank’s board must demonstrate to the regulator that it has established an adequate board oversight and corporate governance program.
- “We take this agreement very seriously, and this effort is a top priority for Comerica Incorporated’s indirect subsidiary, Comerica Bank & Trust, N.A, which is a small, niche national bank separate and distinct from Comerica Bank,” a Comerica spokesperson said in a Friday email.
Dive Insight:
The enforcement action appears to be the culmination of an issue within the bank’s trust unit, related to a wealth management technology platform upgrade executed last year, according to Piper Sandler analyst Scott Siefers. Last December, The Wall Street Journal reported that the OCC was scrutinizing a wealth management platform change Comerica made in May 2023, after the technology update resulted in widespread transaction errors and the bank overdrawing its own accounts by millions of dollars.
The issue affected clients whose trust assets were administered by Comerica and managed by third parties like UBS or Morgan Stanley. During a fund withdrawal, Comerica fronts the money before being reimbursed by the third party; in the wake of the technology upgrade, Comerica struggled to pull reimbursements for months, leaving the bank short funds, the WSJ reported.
There were also issues with trust-account payments failing to go through or posting more than once. The platform – a product of financial technology provider Fidelity National Information Services – had repeatedly crashed, the WSJ reported.
Tom Oehmler, president of Comerica Trust, went on leave last November, the WSJ reported. He left the bank in March, according to his LinkedIn profile.
Under the April agreement, Comerica must submit to the OCC written plans to improve the bank’s asset management internal controls and financial accounting and reporting. An independent third party should be enlisted to assess the effectiveness of the bank’s actions, the agreement said.
The bank also must create a data management and management information systems plan designed to make sure financial transactions are reported accurately and outline appropriate processes to identify and resolve errors in a timely manner.
A financial reporting program the bank is required to adopt should include policies and procedures covering the collection of financial data and regulatory report preparation; specified roles and responsibilities for regulatory reporting; qualified staff responsible for that reporting and periodic training of that staff, the order said.
The OCC also ordered the bank to adopt a program to assess and manage third-party relationship risks, enhance its internal audit program and bolster internal controls. Comerica also agreed to establish a program designed to mitigate risks related to information technology assets, referring to hardware or software that has become outdated.
“We take some heart in that the issues seem limited to a small part of [Comerica’s] overall business, and there is no related fine (which hopefully speaks to lack of severity),” Siefers wrote in a Thursday note to investors. “One wildcard will be costs to remediate/resolve, and we suspect the company could address such questions in a couple weeks with its typical mid-Q update.”
Comerica shed 250 employees and closed 26 branches during the fourth quarter of last year, calling the job cuts “expense recalibration efforts.”
An OCC spokesperson declined to comment on the enforcement action.
