Office of Thrift Supervision (OTS)

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Office of Thrift Supervision (OTS)

What it was

The Office of Thrift Supervision (OTS) was a bureau within the U.S. Department of the Treasury that regulated the nation’s thrift industry—primarily savings and loan associations and other institutions focused on consumer and mortgage lending. It issued federal charters, supervised thrift operations, and enforced regulations to maintain the safety and soundness of insured deposits.

Why it was created

Congress established the OTS in 1989 as the successor to the Federal Home Loan Bank Board in response to the savings and loan (S&L) crisis of the 1980s. During that period, volatile interest rates and heavy deposit outflows pushed many S&Ls into risky lending and investment activities. The resulting losses and institutional failures led to the insolvency of the Federal Savings and Loan Insurance Corporation (FSLIC), large government rescue costs, and the liquidation of hundreds of S&Ls by the Resolution Trust Corporation.

Key functions and activities

  • Regulated federal- and state-chartered thrifts that belonged to the Savings Association Insurance Fund (SAIF).
  • Issued federal charters to savings associations and savings banks.
  • Conducted audits and examinations to ensure compliance with laws and to protect depositors and the insurance funds.
  • Enforced corrective actions and oversaw closures of troubled institutions.

As part of its post-crisis enforcement, the OTS supervised the shutdown or restructuring of many failing thrifts.

Thrifts (what they are)

  • “Thrifts” generally refers to savings and loan associations and mutual savings banks—depository institutions that historically emphasized mortgage and consumer lending.
  • Thrifts could borrow from the Federal Home Loan Bank System, a feature that allowed them to offer competitive deposit rates.
  • Under their charters, thrifts were expected to maintain a lending focus on housing-related assets and participate in the Federal Home Loan Bank System.

End of the OTS

The Dodd-Frank Wall Street Reform and Consumer Protection Act transferred OTS’s responsibilities in 2011 to multiple agencies, including the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve, and the Consumer Financial Protection Bureau (CFPB). Since the 1980s the number of thrift institutions declined substantially—from nearly 4,000 in the 1980s to fewer than 1,000 by 2018.

Sources

  • Dodd-Frank Wall Street Reform and Consumer Protection Act (Public Law 111-203)
  • U.S. Department of the Treasury — Office of Thrift Supervision overview
  • Federal Reserve History — Savings and Loan Crisis