# Office Of Thrift Supervision: What It Is, How It Works

## DEFINITION of the Office of Thrift Supervision (OTS)

The Office of Thrift Supervision was a bureau of the U.S. Treasury Department that was responsible for issuing and enforcing regulations governing the nation's [savings and loan](https://www.investopedia.com/terms/f/federal-savings-and-loan.asp) industry. In 2011, the OTS was merged with other agencies including the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board of Governors, and the Consumer Financial Protection Bureau (CFPB).

## Understanding the OTS

This bureau was responsible for ensuring the safety and soundness of deposits in thrift banks. It did this by auditing and inspecting the banks to see if government regulations and policies were being adhered to.

## How the OTS Worked

The Office of Thrift Supervision (OTS), the successor to the [Federal Home Loan Bank Board](https://www.investopedia.com/terms/f/federal-home-loan-bank-act.asp), was established by Congress in 1989 as the primary federal regulator of all federal and state-chartered savings institutions across the nation that belong to the Savings Association Insurance Fund (SAIF). OTS issued federal charters for savings and loan associations and savings banks. This Bureau adopted and enforced regulations to ensure that both federal and state-chartered thrift institutions operated in a safe and sound manner, according to the Treasury Department.

The OTS was formed following the savings and loan (S&L) crisis, which began under the volatile interest rate climate of the 1970s when vast numbers of depositors withdrew their money from S&L institutions and deposited them in [money market](https://www.investopedia.com/terms/m/moneymarket.asp) funds. To remain in business, S&Ls began engaging in high-risk activities to cover losses, such as commercial real estate lending and investments in [junk bonds](https://www.investopedia.com/terms/j/junkbond.asp). Depositors in S&Ls continued to funnel money into these risky endeavors because their deposits were insured by the Federal Savings and Loan Insurance Corporation (FSLIC).

Widespread corruption and other factors led to the [insolvency](https://www.investopedia.com/terms/i/insolvency.asp) of the FSLIC, the $124 billion bailout of junk bond investments, and the liquidation of more than 700 S&Ls by the [Resolution Trust Corporation](https://www.investopedia.com/terms/r/resolution-trust-corporation.asp).

OTS began enforcing stricter regulations as it shut down hundreds of troubled institutions. The number of thrift banks has dwindled over the years, from nearly 4,000 in the 1980s to less than 1,000 in 2018. 

Thrifts are savings and loans associations. Thrifts also refer to [credit unions](https://www.investopedia.com/terms/c/creditunion.asp) and [mutual savings banks](https://www.investopedia.com/terms/m/mutual-savings-bank.asp) that provide a variety of saving and loans services. Thrifts differ from commercial banks in that they can borrow money from the Federal Home Loan Bank System, which allows them to pay members higher interest.

Due to their charter, thrifts are mandated to focus on housing-related assets and must be members of the Federal Home Loan Bank System. 

> **Article Sources**
>
> 1.  U.S. Government Printing Office. "[Dodd-Frank Wall Street Reform and Consumer Protection Act, Page 124 STAT. 1376., Public Law 111-203.](https://www.govinfo.gov/content/pkg/PLAW-111publ203/html/PLAW-111publ203.htm)" Accessed May 10, 2021.
>     
> 2.  U.S. Department of the Treasury. "[Office of Thrift Supervision](https://www.treasury.gov/about/history/pages/ots.aspx)." Accessed May 10, 2021.
>     
> 3.  Federal Reserve History. "[Savings and Loan Crisis](https://www.federalreservehistory.org/essays/savings-and-loan-crisis)." Accessed May, 10, 2021.