Departing Comptroller Michael Hsu Reflects on Banking Risks & the Future of Regulation in Recent Interview

As Washington prepares for a changing of the guard with a new administration, Michael Hsu, the outgoing Acting Comptroller of the Currency, is leaving behind more than just his office. He’s passing the baton to a yet-unnamed successor at a time when the banking system faces challenges that extend far beyond quarterly earnings.

In a candid interview with The Wall Street Journal, Hsu shared his thoughts on risk, regulation, and the delicate balance organizations must strike between chasing growth and maintaining control. Having served since 2021, Hsu’s tenure saw him navigating the aftermath of major banking failures like Silicon Valley Bank and Signature Bank. But notably, none of those failures fell under the purview of the Office of the Comptroller of the Currency (OCC)—a testament, perhaps, to his insistence on vigilance and proactive oversight.

For Hsu, the crux of effective risk management lies in what he describes as a “tug-of-war” within organizations: the dynamic tension between revenue generators and internal watchdogs.

“When things are going well, there’s always that temptation to say, ‘Great, let’s make money,’” Hsu remarked. “But that’s when the balance can tilt too far. Control functions can get sidelined, told to ‘sit down and shut up,’ and that’s when problems start brewing.”

Hsu likens regulators to referees in this struggle. “We’re here to solve collective action problems,” he explained. “When management feels the pressure to ignore risks in favor of short-term gains, they should feel empowered to turn to us.”

His advice for organizations is to resist the “lemming behaviors” that can drive entire industries into risky territory, and instead, maintain robust internal controls even during boom times.

Risk Conversations: Elevating the Dialogue

In Hsu’s view, one of the most critical shifts needed in the corporate world is elevating risk conversations to the strategic level. Too often, he suggests, these discussions are overshadowed by the lure of profits.

“Healthy organizations make room for dissent,” he said, pointing to the importance of a strong risk and compliance culture. “When times are good, that’s exactly when you need your risk teams to speak up—not to dampen success, but to ensure it’s sustainable.”

Hsu is quick to acknowledge that not every company gets it right. But he emphasizes that those who do often find themselves better prepared for the unexpected, whether it’s market volatility, regulatory shifts, or global economic pressures.

The Compliance Horizon: What Lies Ahead

As the regulatory landscape evolves under a new administration, Hsu predicts that the fundamentals of compliance won’t change—though the emphasis might.

“The OCC’s mission is crystal clear: ensuring the safety and soundness of the federal banking system, treating customers fairly, and providing fair access to financial services,” he noted. “That’s not going to change, regardless of who’s at the helm.”

However, he acknowledges that new leadership can bring a fresh focus to specific areas. For instance, the incoming administration may prioritize reorganizing regulatory agencies or revisiting enforcement strategies. Hsu advises organizations to stay agile, emphasizing that compliance teams should be proactive in anticipating shifts rather than reacting to them.

A Word of Warning—& Optimism

Hsu’s tenure at the OCC has been defined by his balanced approach—neither alarmist nor complacent. When asked if any single risk keeps him awake at night, he demurred, comparing the ecosystem of banking risks to the Heisenberg uncertainty principle: “Focus too much on one risk, and others can sneak up elsewhere.”

It’s a perspective born of experience, one that encourages organizations to adopt a holistic view of risk. And while his term may be ending, his message endures: A strong foundation of compliance and risk management is not just a regulatory obligation—it’s a business imperative.

As Hsu steps away from his post, he leaves behind a banking system that’s arguably stronger and more resilient than when he arrived. Whether that resilience will endure through the next chapter of regulatory change remains to be seen, but it is certain that the tug-of-war between growth and governance isn’t going anywhere.

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