The Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) have issued a joint final rule to define "unsafe or unsound practice" and revise the supervisory framework for issuing Matters Requiring Attention (MRA). This new rule, effective August 27, 2026, aims to enhance clarity and certainty in enforcement and supervision standards for national banks, federal savings associations, and federal branches and agencies, ensuring a focus on material financial risks.
The final rule establishes that an "unsafe or unsound practice" is one contrary to generally accepted standards of prudent operation that, if continued, is likely to materially harm the bank's financial condition or present a material risk of loss to the Deposit Insurance Fund (DIF), or has already caused such material harm. The definition emphasizes that the harm must be "likely" and "material," focusing on financial losses or negative impacts to a bank’s capital, asset quality, earnings, liquidity, or sensitivity to market risk, rather than non-financial risks like reputation.
Furthermore, the rule narrows the scope for issuing an MRA, limiting it to practices that are contrary to prudent operation and could reasonably be expected to cause material financial harm or risk to the DIF, have already caused such harm, or constitute an actual violation of banking law. The agencies also introduced informal "supervisory observations" for lesser weaknesses, which do not require presentation to a bank's board, and clarified how "other violations" will be addressed, primarily requiring remediation without further enforcement action unless legally mandated.
To ensure proportionate oversight, the final rule mandates that supervisory activities and enforcement actions, including MRAs, be tailored based on a bank's capital structure, complexity, activities, asset size, and other financial risk factors. Examiners are required to use objective facts and sound reasoning to determine unsafe or unsound practices or MRAs, and must share the basis for their findings with the bank, promoting consistent application of these new standards.