U.S. Agencies Propose New Rule to Focus Supervision on Material Financial Risks

Key Takeaways

• Supervisory Focus: OCC and FDIC propose rule to concentrate supervision on material financial risks.
• Legal Definition: Proposal formally defines “unsafe or unsound practice” under the Federal Deposit Insurance Act.
• Risk Prioritization: Supervisors would address financial risks over nonfinancial issues such as policies or documentation.
• MRAs and Observations: New standards would guide issuance of Matters Requiring Attention and supervisory observations.
• Proportional Enforcement: Enforcement actions and MRAs would be tailored to the severity and nature of risks.

Deep Dive

The Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) have issued a joint notice of proposed rulemaking aimed at sharpening supervisory attention on material financial risks, while providing banks with greater clarity on supervisory expectations.

The proposal seeks to formally define the term “unsafe or unsound practice” for the purposes of section 8 of the Federal Deposit Insurance Act (12 U.S.C. 1818). By codifying this definition, the agencies intend to create more consistent enforcement standards and remove ambiguity around what constitutes practices that could undermine financial stability.

Under the proposed rule, supervisors would be directed to prioritize issues tied to material financial risks over those that primarily involve policies, processes, documentation, or other nonfinancial matters. The framework would also standardize how and when examiners issue Matters Requiring Attention (MRAs) and communicate other non-binding supervisory observations, reducing uncertainty for financial institutions subject to oversight.

Additionally, the rule would allow for tailoring of enforcement actions and MRAs, ensuring that supervisory responses are proportionate to the risks identified. According to the agencies, this approach is designed to make the examination process more transparent, focused, and risk-driven.

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