Remarks by

John D. Hawke, Jr.

Comptroller of the Currency

“Deposit Insurance Reform and the 

Cost of Bank Supervision”

Exchequer Club

Washington, D.C. 

December 20, 2000

Comptroller of the Currency

Administrator of National Banks
1

Remarks by John D. Hawke, Jr.

Comptroller of the Currency

“Deposit Insurance Reform and the 

Cost of Bank Supervision”

Exchequer Club • Washington, D.C.

December 20, 2000

Earlier this year, the Federal Deposit Insurance Corporation (FDIC) launched a full-scale review of the nation’s 

deposit insurance system. I can scarcely imagine a more 

opportune time for such a review to occur. The BIF [the FDIC’s 

Bank Insurance Fund] and the SAIF [the FDIC’s Savings Association Insurance Fund] are both at levels in excess of their 

statutorily determined reserve ratios. The banking system’s earnings are robust; a ninth consecutive earnings record for the year 

is still a possibility. Assets and deposits continue to grow, if more 

slowly than in recent years. Capital is at historical highs. Bank 

failures are a rarity.

It’s also clear, however, that the economy and the banking system 

are entering a period of uncertainty. Rising interest rates and a 

slowdown in economic growth have already had an impact on 

bank fi nancial statements. In the third quarter of this year, we 

saw the consequences of increasing credit risk: declines in credit 

quality and rising loan loss provisions. Securities losses have 

increased and noninterest income growth has slowed. In addition 

to opportunities, 2001 will undoubtedly also bring stresses 

and challenges.

So it’s particularly important that we act now to take a fresh look 

at our deposit insurance system while there’s still time to do it 

methodically, inclusively, and comprehensively.

An “options paper” released by the FDIC back in August highlighted a number of fundamental issues and has stimulated an 

especially lively dialogue on the issues of premiums and fund 

size, which are among the most controversial aspects of the 

current deposit insurance system.
2

These areas are badly in need of reform. The law today sets a 

“designated” reserve ratio for the deposit insurance fund of 1.25 

percent of deposits, regardless of the level of risk to which those 

deposits might be exposed, and severely constrains the FDIC’s 

ability to charge risk-based premiums when the reserve ratio is 

above or below that level. That results in a system that charges 

little or nothing for this insurance today, when banks are earning 

big profi ts, and then charges a lot when banks are taking losses 

and their ability to pay is lessened. And our system does not 

adequately discriminate in its pricing between risky institutions 

and prudent, well-managed institutions. To be sure, low-rated 

banks pay somewhat higher premiums, but 

well-rated banks that choose to take higher 

risks do not. In fact, banks taking higher 

risks receive a twofold deposit insurance 

subsidy: fi rst, from their more conservative counterparts; and then, like every 

insured institution, from the U.S. taxpayer 

through the Treasury Department, which 

provides a multibillion dollar line of credit 

and back-up guarantees, all free of charge, 

to the FDIC. Finally, banks do not compensate the FDIC, or 

taxpayers, for the use of the deposit insurance system, even 

though the availability of federal deposit insurance is a government benefi t that is essential for the conduct of the banking 

business.

Most analysts today agree that risk-based pricing of deposit 

insurance makes sense. But what exactly would a risk-based 

system look like? In a speech last week before the Women 

in Housing and Finance here in Washington, the OCC’s chief 

economist, Jim Wilcox, discussed an approach that he has developed, an approach he calls MIMIC—short for Mutual Insurance 

Model with Incentive Compatibility. Jim was not speaking for the 

OCC in this speech, but his thoughtful and perceptive analysis 

will certainly have a bearing on any position the OCC may take 

in the future.

The deposit insurance 

“system does not 

adequately discriminate 

in its pricing between 

risky institutions and prudent, 

well-managed institutions.”
3

Under MIMIC, banks would pay a risk-based “user fee” to the 

FDIC; the FDIC, in turn, would make payments to the Treasury 

in return for the standing line of credit and “catastrophe insurance” that Treasury currently provides at no cost. The FDIC 

would set and periodically adjust a risk-based range for the 

reserve ratio, to ensure that the size of the fund refl ects the 

amount of risk currently in the system. When the fund exceeded 

the specifi ed range for the reserve ratio, the surplus would 

be rebated to banks; when it fell short, surcharges would be 

imposed. And, to ensure that banks adding deposits didn’t reduce 

the reserve ratio, the MIMIC model would assess a “dilution fee” 

for each additional dollar of insured deposits. Conversely, banks 

with shrinking deposits would receive a dilution refund.

MIMIC is one of several risk-based models that have been proposed by various experts on deposit insurance issues. They differ 

on some key details. But it’s important to recognize that all of 

these models share the same basic principles—principles that I 

believe should be embodied in all facets of the deposit insurance 

reform effort.

First, whatever changes we adopt in the 

current deposit insurance system should 

make that system more effi cient, in the 

sense that the actual costs and benefi ts 

of coverage are measured and rationally 

allocated. Increasing reliance on risk-based 

pricing would take us at least some distance toward that goal.

This implies that the subsidies that distort 

our current system—bank to bank, taxpayer to bank, or otherwise—should be 

eliminated and, as nearly as possible, 

deposit insurance should be priced in accordance with market 

principles. Risk-based pricing could end or signifi cantly reduce 

the subsidies provided by safer banks to riskier banks; the payment of fees to the Treasury, as provided in MIMIC, could reduce 

the public subsidy that all insured depositories receive today.

“[W]hatever changes we 

adopt in the current deposit 

insurance system should 

make that system more 

effi cient, in the sense that 

the actual costs and benefi ts 

of coverage are measured 

and rationally allocated.”
4

Finally, our deposit insurance system must be transparent. In 

order to be allocated equitably, the costs and benefi ts of deposit 

insurance must be priced accurately and openly. Reliable and 

consistent information about the level of risk in the fi nancial 

system and the ability of the deposit insurance system to cope 

with that risk would help all the interested parties—fi nancial 

institutions, investors, bank customers, and taxpayers—make 

informed economic decisions.

Pursuing effi ciency leads to another issue that needs to be 

resolved. Since the inception of federal deposit insurance, the 

FDIC has funded its own operations from premiums and earnings 

from the deposit insurance fund. At present, with so few banks 

paying premiums, the FDIC relies on the income generated by 

the fund to pay for FDIC operations. In 1999, $1.2 billion, out 

of $1.8 billion in fund revenues, went to defray the FDIC’s costs 

of operation.

Nearly half of the 1999 amount —about $600 million—was spent 

on the FDIC’s supervision of state nonmember banks. If that 

amount did not need to be diverted from the fund to defray 

FDIC’s supervision expenses, the future insurance costs of the 

FDIC to all FDIC member institutions, including national banks, 

would obviously be lower.

If we’re to allocate the costs and benefi ts of deposit insurance 

equitably and effi ciently, we also need to measure and allocate 

the FDIC’s non-insurance costs appropriately. In a regime of 

risk-related premiums, deposit insurance premiums should pay 

for deposit insurance. And non-insurance costs should be paid for 

on a similar, effi cient basis.

Unfortunately, that’s not the way it happens today. The longstanding practice of using insurance premiums paid by all 

insured institutions to defray the FDIC’s costs of routine bank 

supervision of state nonmember banks is not only inequitable, 

but it deprives the FDIC of an important source of market discipline over its use of resources. And, very signifi cantly, it has 

given rise to undesirable tensions in the dual banking system.
5

Of course, the dual banking system is hardly “dual,” in the sense 

that the states and the federal government maintain and supervise 

completely separate banking systems. For many decades, the 

FDIC and the Federal Reserve have played the preponderant 

role in the examination and supervision of state-chartered banks. 

For more than 30 years, almost every time Congress has 

imposed new federal bank supervisory and 

regulatory responsibilities, it has parceled 

out authority and responsibility among the 

three federal banking agencies. The result 

is that today the supervisory functions that 

the FDIC and the Fed perform for state 

banks are virtually identical to those performed by the OCC for national banks. To 

put it another way, while both the FDIC 

and the Fed have some signifi cant responsibilities beyond those of the OCC, there 

is virtually no function performed by the 

OCC for national banks that is not replicated by the FDIC and the Fed for state 

banks. In short, the most important division 

of bank supervisory authority today is not 

that between the states and the federal government, as may 

earlier have been the case, but a division among the three federal 

regulatory agencies.

I think fair-minded people would agree that there is an inherent 

inequity in a system that requires national banks to pay the OCC 

for their supervision and then to pay again to support the cost 

of supervising some of their competitors, the state nonmember 

banks. At present, national bank contributions account for almost 

52 percent of the funds in the insurance fund. Thus, every dollar 

expended by the FDIC on state nonmember bank supervision 

represents, in effect, a charge of 52 cents to national banks. And 

the same can be said of the Fed’s supervision of state member 

banks, the cost of which is partially offset by the reserve balances held by national banks. In other words, when one considers the extent to which the costs of supervision are borne by 

“[T]he dual banking system 

is hardly ‘dual’ . . . the most 

important division of bank 

supervisory authority today 

is not that between the states 

and the federal government, 

as may earlier have been 

the case, but a division 

among the three federal 

regulatory agencies.”
6

The banking industry rebuilt the Bank Insurance Fund in 

the early 1990s, paying over $28 billion in insurance premiums. 

Over half of these BIF premiums came from national banks.

52%

33%

13% 2%

$29.5B*

State member banks

Other

National banks

State nonmember banks

* BIF balance as of year-end 1999 

Premium sources: 1990 -1999

The FDIC supervises the largest number of institutions; 

OCC-supervised banks hold most of the industry’s assets.

Figures as of 12/1999

0

1,000

2,000

3,000

4,000

5,000

6,000

Banks Assets ($ billions)

OCC FDIC FRS OCC FRS FDIC

2,364

5,206

$3,271

$1,040

$1,423

27%

61%

12%

58%

17%

1,010 25%

the banks themselves, it is clear that state-chartered banks are 

the recipients of substantial federal subsidies, delivered by their 

federal supervisory agencies.

In addition to this inequity, I 

think most objective observers 

would be concerned by the 

implications of this subsidy.

Competition between state 

and national charters has 

always been one of the 

hallmarks of the dual banking system—and one of 

its greatest strengths. It’s 

encouraged effi ciency, creativity, and responsiveness 

on the part of the regulators, 

and enabled banks to choose 

the charter that most closely 

matches their business needs 

and objectives. Typically, 

banks have made this 

decision after weighing a 

variety of factors—among 

other things, regulatory 

philosophy, access, the perceived quality of supervisory services, and how 

much they had to pay for 

those services.

Yet, because of the subsidy, the assessment differential between a state and 

a national charter can be 

substantial, and clearly can affect a bank’s choice of charter. 

Some states charge less than half of what a comparably sized 

national bank would pay the OCC—enough to tip the balance for 

Number of banks and share of

assets supervised by the three

federal regulators

Premium sources, by type of bank, 

that contributed to rebuilding the 

Bank Insurance Fund
7

Because state banks pay only for the supervision costs 

incurred by the states, their supervisory assessments 

average less than half those of national banks.

* Average fees paid in California, Delaware, Florida, Illinois, New York, 

and Texas, 1999.

Average assessment for 

a $500 million bank 

0

20

40

60

80

100

120 $111

$43

National

bank

State

$ Thousands

bank*

some banks. As earnings pressures grow in a slowing economy, 

such considerations may loom even larger for some banks. It is 

hard to see any compelling reason why federal banking policy 

should create such incentives to diminish the national banking 

system. A truly vigorous dual banking system should not be 

founded on the maintenance of a federal subsidy for state banks.

State supervisors sometimes 

argue that this fee differential between state and federal charters stems from the 

greater “effi ciency” of state 

supervision. But effi ciency 

has nothing to do with it. 

The fact is that the predominant regulation of state banks 

is federal, and the scope of 

responsibilities of state bank 

regulators is typically far narrower than that of the respective federal regulator. When 

you add up the numbers and 

compare apples to apples—

comparing the total costs of supervising state and national banks, 

including the costs of federal supervision of state banks—it 

becomes quite clear that the costs are comparable. Indeed, if 

there are any ineffi ciencies in the structure, they are most likely 

to result from the maintenance of a two-tiered supervisory system—state and federal—for all state-chartered banks. Unquestionably, a single agency could perform these functions at a lower 

cost than two separate systems of supervision.

Let me be clear: I am not advocating a merger of the federal 

agencies or elimination of state supervision. I continue to believe 

in the dual banking system. But so long as state banks are subject 

to overlapping state and federal regulation, there is bound to be 

some ineffi ciency in that component of the regulatory structure.

Example of supervisory assessment

differential between national and 

state banks

Text continues on page 10
8

Activities as Primary Federal Regulator of Banks OCC FDIC FRS

Bank Examinations and Reporting x x x

Entry Approvals (e.g., Charter, FDIC Coverage, Fed Membership) x x x

Branch Applications x x x

Merger and Consolidation Applications x x x

Supervisory Enforcement Actions (C&Ds, CMPs, Removals) x x x

Enforce Capital Requirements and Prompt Corrective Action x x x

Enforcement Actions for Any Violation of Law x x x

Enforcement Actions for Unsafe or Unsound Banking Practice x x x

Examine for Community Reinvestment Act Compliance x x x

Enforce the Bank Secrecy Act x x x

Enforce the Securities Exchange Act of 1934 x x x

Enforce Laws on Government and Municipal Securities Dealers x x x

Enforce Affiliate and Insider Transactions Rules x x x

Administer Change in Bank Control Act x x x

Supervise Foreign Activities x x x

Right To Approve Directors and Senior Executives x x x

Authority To Prescribe Operational and Managerial Standards x x x

Receive Notices of Branch Closings x x x

Enforce Management Interlocks Act x x x

Participation in FFIEC x x x

Administer Right to Financial Privacy Act x x x

Enforce Bank Protection Act x x x

Enforce Expedited Funds Availability Act x x x

Examine for Truth in Savings Act Compliance x x x

Examine for Truth in Lending Act Compliance x x x

Examine for Fair Credit Reporting Act Compliance x x x

Examine for Equal Credit Opportunity Act Compliance x x x

Administer the International Banking Act x x x

Examine for Fair Debt Collection Practices Act Compliance x x x

Examine for Electronic Funds Transfer Act Compliance x x x

Examine for National Flood Insurance Act Compliance x x x

Examine for Flood Disaster Protection Act Compliance x x x

Examine for Home Mortgage Disclosure Act Compliance x x x

Examine for Fair Housing Act Compliance x x x

Examine for Fair Lending Act Compliance x x x

Examine for Real Estate Settlement Procedures Act Compliance x x x

Examine for Consumer Leasing Act Compliance x x x

Examine for Unfair and Deceptive Practices Law Compliance x x x

Enforce International Lending Supervision Act x x x

Establish and Enforce Real Estate Lending and Appraisal Standards x x x

Participation in the Basel Committee on Banking Supervision x x x

CO M PARISON O F ACTIVITIES OF FEDERAL BANKING AGENCIES 
9

Other Supervisory and Regulatory Activities OCC FDIC FRS

Operation of Federal Deposit Insurance System x

Insurance Payouts, Receiverships and Resolution of Failed Banks x

Approval of Activities of Insured State Banks x

Rulemaking on Payment of Interest on Demand Deposits x x

Rulemaking Relating to Insider Lending x x

Supervision and Regulation of Bank Holding Companies x

Supervision and Regulation of Edge and Agreement Corporations x

Rulemaking Relating to Foreign Banking Organizations in U.S. x

Rulemaking Under Export Trading Company Act x

Operation of the Payments System x

Issuance and Distribution of Currency x

Rulemaking Under Truth in Lending Act x

Rulemaking Under Equal Credit Opportunity Act x

Rulemaking Under Consumer Leasing Act x

Rulemaking Under Truth in Savings Act x

Rulemaking Under Expedited Funds Availability Act x

Rulemaking Under Electronic Funds Transfer Act x

Rulemaking Under HMDA x

Rulemaking on Interbank Liabilities x

Rulemaking on Unfair and Deceptive Practices x

Conduct of Monetary Policy and Operation of Discount Window x

Rulemaking on Margin Requirements x

Rulemaking Under Sections 23A and B x

Setting of Reserve Requirements x

“[T]oday the supervisory functions that the 

FDIC and the Fed perform for state banks are 

virtually identical to those performed by the 

OCC for national banks. To put it another way, 

while both the FDIC and the Fed have some 

signifi cant responsibilities beyond those of the 

OCC, there is virtually no function performed 

by the OCC for national banks that is not replicated by the FDIC and the Fed for state banks.”

COMPARISON OF ACTIVITIES OF FEDERAL BANKING AGENCIES
10

0

200

400

600

800

1,000

1,200

National banks State banks

$ Millions

$379M*

$1,030M

Supervisory costs and direct assessments (1999)

$160M

$384M

Cost Fees Cost Fees

The federal cost of supervising national banks is covered by OCC 

assessments on national banks. Fees paid to state authorities are 

equivalent to 16% of the cost of state bank supervision. 

* The OCC's total revenue for 1999 was $395M. The additional $16M represents 

 ancillary income.

Last year, the OCC spent less than $400 million to supervise 

approximately 2,300 national banks, which controlled roughly 

58 percent of the U.S. commercial bank assets. Neither we 

nor the banks we supervise receive subsidies, direct or indirect; 

national bank assessments cover almost 98 percent of our 

total expenditures.

Over the same period, the FDIC spent $590 million on state 

nonmember bank supervision, and the Federal Reserve spent 

$280 million supervising state member banks. When you add in 

the approximately $160 million spent by the states, you come 

up with a grand total of more than $1 billion—a number that 

represents the real cost of state bank supervision.

There, in the difference 

between the $160 million 

spent by the states and the 

$1 billion total cost of state 

bank supervision, is the inequity—a funding gap the 

major part of which is 

paid by those national banks 

that have contributed to the 

FDIC insurance fund and 

that maintain reserves with 

the Fed. Of course, American 

taxpayers also pay for part of 

these costs, for every dollar 

that the Federal Reserve 

spends on the supervision 

of state member banks is a 

dollar that is not remitted to 

the Treasury, as would otherwise be the case.

Those of you who are longtime followers of regulatory issues are 

probably not hearing this discussion for the fi rst time. The inequity in the funding of federal supervision of state and national 

banks is an issue that’s engaged and vexed Comptrollers of the 

Currency going back to the days of Jim Saxon in the 1960s, 

System-wide supervisory cost 

and direct assessment comparison between national and statechartered banks
11

“A truly vigorous dual 

banking system should 

not be founded on the 

maintenance of a federal 

subsidy for state banks.”

and one that’s been the subject of a fair number of academic 

studies and legislative reports since then. One approach to 

the problem that has frequently been proposed in the past would require the FDIC 

and the Fed to assess state banks directly 

for their cost of federal supervision. Every 

year since 1993, the Offi ce of Management 

and Budget has proposed such a plan, and 

every year it has been effectively dead on 

arrival in Congress. While this approach 

is in many ways the most straightforward, 

since it would end the subsidization of federal supervision for 

state banks by national banks and restore a healthier competition 

to the dual banking system, one has to confront the political 

reality that Congress is not likely to impose such a new charge 

on state banks.

Others have suggested that the OCC could simply alternate 

national bank examinations with the FDIC, as the states now do. 

While that might reduce OCC’s costs somewhat, it would clearly 

add to the FDIC’s costs—and it would do so in a most ineffi cient 

way, since both of these federal agencies would have to maintain 

a capacity to examine the same set of national banks. The sum 

of the parts would inevitably be greater than the whole. As I 

mentioned earlier, it is precisely this ineffi ciency that characterizes the current two-tier supervision of state banks.

Moreover, such a plan would increase the supervisory burden 

on national banks by subjecting them to the jurisdiction of two 

agencies, instead of one. This would effectively destroy one of 

the key attributes of the national charter—the ability to deal with 

a single primary regulator.

Some have suggested that the fees charged by the FDIC should 

simply be unbundled into two components. The fi rst, charged to 

all, would cover the risk-adjusted cost of deposit insurance; the 

second would cover the FDIC’s cost of supervision, and would 

be paid by banks whose primary federal supervisor is the FDIC. 

Others have suggested that the FDIC should remedy the inequity 
12

of using national bank contributions to the FDIC to pay for the 

costs of state bank supervision by rebating to national banks—or 

to the OCC, for pass-through to national banks—an amount 

equal to their contribution to the cost of federal supervision of 

state banks.

Which of these approaches is the most sensible? I don’t have an 

answer to that question for you today. My purpose in discussing 

the issue here is simply to raise awareness of its importance and 

to encourage public dialogue on an issue that we believe must 

be considered in the context of deposit insurance reform. I look 

forward to hearing from you and from other interested parties 

about this subject.
13

Frequently Asked Questions about 

Federal Funding of State Bank Supervision

1. Q As a practical matter, if the fee differential between 

the state and the national charter is eliminated, wouldn’t 

the result be a migration of state banks to the OCC, thus 

damaging the dual banking system?

A There is no reason to believe that the continued health of our 

dual banking system depends upon national banks subsidizing 

the federal supervision of state banks. 

Advocates of the state banking system should not underestimate 

the vitality of their charter. The state system will always be 

attractive to many banks and does not require a subsidy from 

national banks to continue to thrive. With the proliferation of 

state “wild card” laws, plus section 24 of the Federal Deposit 

Insurance Act, the Riegle-Neal Amendments Act of 1997, and a 

host of other initiatives, state banks are competitive, innovative, 

and responsive. 

2. Q State banking authorities claim that state bank supervisory costs are lower because they are more effi cient. They cite 

their system of “coordinated supervision” with the Federal 

Reserve System (FRS) and FDIC as part of an effi cient structure that enables them to keep costs down. Are lower state 

supervisory costs a result of greater effi ciency?

A The difference in supervisory costs has nothing to do with 

effi ciency. Rather, it is the result of a very signifi cant difference 

in the scope of federal and state supervisory functions, and 

the inevitable consequence of the FDIC and FRS policy of providing free federal supervision to state banks. The cost of that 

supervision is instead borne by taxpayers and the banking system 

as a whole.

Although it is true that the FDIC and the FRS alternate examination duties with state authorities, both of these federal agencies 

provide extensive supervisory and regulatory services to state 

banks. Congress has increasingly chosen in recent decades to 
14

make both state and national banks subject to federal supervision 

and regulation, and has enacted a plethora of measures—for 

example, the Truth in Lending and Bank Secrecy acts, to name 

only two—applicable uniformly to all banks. Thus, the range of 

supervisory functions performed by the three federal agencies 

is practically identical, and far broader than that typically performed by state agencies. What is different is that national 

banks pay the full cost of their federal supervision, as well as a 

substantial part of the cost of federal supervision of state banks.

3. Q Don’t state banks pay for FDIC supervision and regulation through deposit insurance premiums?

A Both state and national banks pay insurance premiums to 

the FDIC. In the current environment, with few banks paying 

any deposit insurance premiums, the majority of the FDIC’s 

revenue is derived from earnings on the Bank Insurance Fund 

(BIF). National bank premiums paid in the past, and earnings 

on those accumulated premiums, make up about 52 percent of 

the current BIF. Similarly, about 33 percent and 13 percent of 

the BIF can be attributed, respectively, to state nonmember and 

state member bank premiums paid in the past and earnings on 

those accumulated premiums. The only difference is that state 

nonmember banks receive supervision and regulation from the 

FDIC, while national banks do not. 

Deposit insurance premiums should pay for deposit insurance. 

It is not equitable to use part of the premium to defray the cost of 

federal supervision and regulation for state banks, while requiring national banks to pay the full cost of federal supervision 

and regulation.
15

4. Q Why doesn’t the Comptroller explore a supervisory 

sharing arrangement, similar to what the states have with the 

FDIC, to reduce the overall cost of running the OCC? 

A The arrangements the FDIC has with the states focus on sharing examination responsibilities. This approach is based upon 

Section 10(d)(1) of the FDI Act, which specifi es which federal 

agency is responsible for examining particular types of depository institutions and when examinations by state authorities may 

alternate with federal exams in the case of state-chartered institutions. This structure allows the shared and alternate examinations that reduce the cost to state banking departments with 

savings passed along to state banks in the form of lower fees. 

There is no statutory authority, however, for the OCC to shift part 

of its examination functions and other regulatory responsibilities 

to another federal regulator. 

It is probably true that if an alternating examination arrangement 

for the OCC and FDIC were enacted into law—with the latter’s 

share provided at no cost to national banks—it would result in 

somewhat lower OCC direct expense and, by extension, lower 

OCC supervisory fees. However, the responsibilities of the banking agencies include far more than examining banks. The OCC, 

as their primary regulator, would remain responsible for adopting, administering, interpreting and enforcing regulations applicable to national banks. These responsibilities under federal law 

would not be transferred to the FDIC and thus the extent of cost 

savings that would result from sharing examination functions 

would not be great. But such an arrangement would clearly 

increase the FDIC’s costs, and would result in an extension of 

the subsidy to national banks. Sound public policy should work 

toward eliminating this federal subsidy rather than extending it 

to national banks. 

Finally, a sharing arrangement would not reduce the cost of 

national bank supervision but simply shift a portion of it to 

another agency. Indeed, the overall cost of supervision would 

likely increase since the OCC and FDIC would have to maintain 

separate capacity to examine (and coordinate the examination of) 

the same set of banks.