OCC Rewrites Enforcement Playbook to Focus on Big Bank Risks

The Office of the Comptroller of the Currency (OCC) issued two revised policies and procedures manuals and proposed amendments to Violations of Laws and Regulations framework Thursday (Aug. 27), saying in a press release that these moves will focus supervisory attention on the most significant risks and violations.

Announcing these materials in a Thursday post on X, Comptroller of the Currency Jonathan V. Gould said: “A supervisory culture based on check-the-box compliance can distract examiners and bank executives from material financial risks that can endanger the viability of a bank if unaddressed. [The OCC’s] new framework is intended to promote safety and soundness by returning to risk-based supervision.”

The OCC’s revisions to PPM 5310-3, “Bank Enforcement Action and Related Matters,” emphasize material financial risks and allow the OCC to escalate to an enforcement action against a large or complex bank based on practices that would not lead it to do so against a community bank, according to the press release.

The OCC’s revisions to PPM 5400-11, “Matters Requiring Attention,” clarify that the regulator will only issue an MRA for actions that meet the listed standard and that MRA’s must be tailored based on financial risk-related factors, the release said.

The OCC also released for public comment a notice of proposed rulemaking that would establish two categories of violations of laws or regulations and would focus supervisory attention on the category of violations that have the greatest impact on the institution or its customers, per the release.

Gould said in the release: “It is critical that examiners and institutions prioritize material financial risks and substantive violations of law over concerns related to policies, process, documentation and other nonfinancial risks, and that the agencies’ supervision and enforcement standards further that prioritization.”

The OCC announced in another Thursday press release that it and the Federal Deposit Insurance Corporation (FDIC) issued a final rule that establishes a uniform definition of “unsafe or unsound practice” to further their efforts to focus the attention of examiners and institutions on material financial risks.

FDIC Chairman Travis Hill said in a statement released Thursday: “The final rule shifts that nature of supervisory criticisms in two key ways. First, it shifts our attention towards underlying fundamental risks and away from banks’ processes for managing those risks, and second, it imposes a materiality threshold for evaluating those potential risks. In combination, the result is that examiners will focus only on issues that can have a material impact on the financial condition of an institution and on actual violations of relevant laws or regulations.”

The post OCC Rewrites Enforcement Playbook to Focus on Big Bank Risks appeared first on PYMNTS.com.