Office of Thrift Supervision (OTS)

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 giving and authorizing regulations overseeing the nation's savings and loan industry. In 2011, the OTS was merged with different 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).

Figuring out the OTS

This bureau was responsible for guaranteeing the safety and sufficiency of deposits in thrift banks. It did this by auditing and reviewing the banks to check whether government regulations and policies were being complied with.

How the OTS Worked

The Office of Thrift Supervision (OTS), the replacement to the Federal Home Loan Bank Board, was laid out by Congress in 1989 as the primary federal regulator of all federal and state-chartered savings institutions across the nation that have a place with the Savings Association Insurance Fund (SAIF). OTS issued federal charters for savings and loan associations and savings banks. This Bureau adopted and implemented regulations to guarantee that both federal and state-chartered thrift institutions operated in a safe and sound way, as per the Treasury Department.

The OTS was framed following the savings and loan (S&L) crisis, which started under the unpredictable interest rate climate of the 1970s when tremendous numbers of depositors pulled out their money from S&L institutions and deposited them in money market funds. To stay in business, S&Ls started participating in high-risk activities to cover losses, for example, commercial real estate lending and investments in junk bonds. Depositors in S&Ls kept on funneling money into these dangerous endeavors in light of the fact that their deposits were insured by the Federal Savings and Loan Insurance Corporation (FSLIC).

Boundless corruption and different factors prompted the insolvency of the FSLIC, the $124 billion bailout of junk bond investments, and the liquidation of in excess of 700 S&Ls by the Resolution Trust Corporation.

OTS started upholding stricter regulations as it shut down many troubled institutions. The number of thrift banks has dwindled throughout the long term, from almost 4,000 during the 1980s to under 1,000 of every 2018.

Thrifts are savings and loans associations. Thrifts likewise allude to credit unions and mutual savings banks that give an assortment of saving and loans services. Thrifts contrast from commercial banks in that they can borrow money from the Federal Home Loan Bank System, which permits them to pay individuals higher interest.

Due to their charter, thrifts are commanded to zero in on lodging related assets and must be individuals from the Federal Home Loan Bank System.