OCC Refocuses Bank Enforcement Playbook on Material Risks
The OCC revised two supervisory manuals and proposed a violations framework that puts large-bank enforcement and matters requiring attention around material financial risks.
U.S. bank supervisors will use a narrower enforcement playbook that puts material financial risks and substantive legal violations ahead of process-heavy compliance findings, PYMNTS reported after the Office of the Comptroller of the Currency issued two revised manuals and proposed a companion rule change.
The OCC released revisions to PPM 5310-3, covering bank enforcement actions and related matters, and PPM 5400-11, covering matters requiring attention.
Both documents were announced Thursday, Aug. 27, alongside proposed amendments to the regulator's Violations of Laws and Regulations framework.
The enforcement-action manual gives the agency room to escalate against a large or complex bank based on practices that would not trigger the same response at a community bank.
That difference makes bank size and complexity part of the supervisory path rather than treating every institution under one mechanical threshold.
The matters-requiring-attention manual narrows when examiners should issue an MRA.
Actions must meet the listed standard, and the findings must be tailored around financial risk-related factors instead of becoming broad documentation demands.
Comptroller of the Currency Jonathan V. Gould used an X post to argue that examination routines built around checklist compliance can pull both supervisors and bank executives away from financial risks serious enough to threaten an institution.
In the OCC release, Gould framed the new framework as a return to risk-based supervision, with examiners and institutions prioritizing substantive violations over policies, processes, documentation and other nonfinancial risks.
The proposed rulemaking would create two categories of violations of laws or regulations.
Supervisory attention would concentrate on the category with the greatest impact on the institution or its customers, keeping lesser violations from driving the same enforcement posture as higher-impact failures.
A separate Thursday action extended the same risk-based approach beyond the OCC.
The OCC and the Federal Deposit Insurance Corporation issued a final rule establishing a uniform definition of unsafe or unsound practice, with FDIC Chairman Travis Hill describing the shift as a way to focus supervisory criticism on material financial risks.
The package changes how banks will read examination priorities: the decisive factor is not whether a policy file is imperfect, but whether the practice, violation or control failure creates a material financial risk for the institution or its customers.
The proposed violations framework still has to move through public comment before it becomes final.
