Updated OCC handbook addresses actions versus banks with ‘persistent weaknesses’

The OCC today launched a modified policies and treatments manual detailing actions OCC inspectors might take versus banks with “persistent weaknesses.” The handbook’s Appendix C concentrates on bigger and more complicated organizations under OCC guidance, though the company kept in mind that “it may apply this framework, including the restrictions discussed . . .  to any bank.”

The OCC stated that “persistent weaknesses” might consist of “composite or management component ratings that are ‘3’ or worse, or three or more weak or insufficient quality of risk management assessments, for more than three years; failure by the bank to adopt, implement, and adhere to all the corrective actions required by a formal enforcement action in a timely manner; or multiple enforcement actions against the bank executed or outstanding during a three-year period.”

The handbook explains actions the OCC might take versus banks that show consistent weak points. This might consist of extra requirements and constraints, such as requirements that a bank enhance its capital or liquidity position, in addition to constraints on the bank’s development, service activities or payments of dividends. “Should a bank fail to correct its persistent weaknesses in response to prior enforcement actions or other measures . . . the OCC will consider further action to require the bank to remediate the weaknesses,” the company stated. “Such action could require the bank to simplify or reduce its operations, including that the bank reduce its asset size, divest subsidiaries or business lines, or exit from one or more markets of operation.”

In associated news, the OCC likewise upgraded the “Liquidity” pamphlet of its Comptroller’s Handbook. The pamphlet supplies inspectors with assistance on examining the amount of a bank’s liquidity threat and quality of liquidity threat management. The pamphlet changes an earlier variation released in August 2021 and shows modifications in policies, released OCC issuances and clarifying edits made considering that the last upgrade.


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