Updated OCC manual addresses actions against banks with ‘persistent weaknesses’

The OCC today released a revised policies and procedures manual detailing actions OCC examiners may take against banks with “persistent weaknesses.” The manual’s Appendix C focuses on larger and more complex institutions under OCC supervision, though the agency noted that “it may apply this framework, including the restrictions discussed . . .  to any bank.”

The OCC said that “persistent weaknesses” may include “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 manual describes actions the OCC may take against banks that exhibit persistent weaknesses. This could include additional requirements and restrictions, such as requirements that a bank improve its capital or liquidity position, as well as restrictions on the bank’s growth, business 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 agency said. “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 related news, the OCC also updated the “Liquidity” booklet of its Comptroller’s Handbook. The booklet provides examiners with guidance on assessing the quantity of a bank’s liquidity risk and quality of liquidity risk management. The booklet replaces an earlier version issued in August 2021 and reflects changes in regulations, published OCC issuances and clarifying edits made since the last update.