Reiterating the importance of bank risk management, issues management, and governance
The Office of the Comptroller of the Currency (OCC) plans to implement new policies and procedures when considering supervisory and enforcement actions against banks that exhibit or fail to correct persistent weaknesses (i.e., previously identified by the OCC as “deficient practices and/or violations”).
The new policies and procedures are included as a new “Appendix C, Actions Against Banks With Persistent Weaknesses”, within the OCC’s Policies and Procedures Manual 5310-3, “Bank Enforcement Actions and Related Matters”. They outline additional supervisory or enforcement actions the OCC may take against banks with “continuing, recurring, or increasing deficiencies over a prolonged period”, and particularly when the bank has not made “sufficient progress” toward correcting the deficiencies.
In general, Appendix C is directed toward:
“Persistent weaknesses” may include:
When a bank exhibits “persistent weaknesses”, the OCC will consider additional actions, such as assessing civil money penalties (CMPs) or issuing other enforcement actions. A resulting enforcement action may include requirements or restrictions such as one or more of the following:
Should a bank fail to correct its “persistent weaknesses” in response to prior enforcement actions or other measures, the OCC will consider further actions that would require the bank to simplify or reduce its operations, including:
The new policies and procedures echo the escalation framework outlined by the Acting Comptroller in January 2023 in remarks about “detecting, preventing, and addressing” banks that are “too big to manage (TBTM)”.
The Acting Comptroller stated that an escalation framework ensures “that deficiencies are clearly identified, that banks are given opportunities to address them, and that failure to do so results in proportionate, fair, and effective consequences… A well-calibrated escalation framework gives banks sufficient opportunities to address deficiencies. A bank’s “repeated failures” to do so then become, by themselves, presumptive evidence that it is at the limits of its manageability. Under such a framework, the need for simplification and divestitures at a bank is clear from management’s actions and outcomes, or lack thereof.”