While the Office of the Comptroller’s recovery planning guidelines currently apply to banks with at least $250 billion in assets, expanding the guidelines to cover banks with at least $100 billion in assets should be on the table, Acting Comptroller of the Currency Michael Hsu said today. In a speech, Hsu talked about the importance of recovery planning following last year’s bank failures. He also suggested those failures may justify expanding the number of banks that fall under the recovery planning guidelines used by OCC examiners, although the agency hasn’t made any specific proposals.
The OCC guidelines list eight key elements of an effective recovery plan, but Hsu focused on three. First, banks should have triggers that, when breached, will assist them in identifying the risk or existence of severe stress. Second, recovery options in a plan must be able to put into action. Third, impact assessments should help managers and boards of directors understand the full range of consequences of taking certain actions.
“Given last year’s banking turmoil, I believe expanding the application of the guidelines to all large banks with at least $100 billion in assets warrants serious consideration,” Hsu said. “While counterfactuals are hard to prove, one does not have to strain to see how strong recovery planning might have mitigated the failures of Silicon Valley Bank and Signature Bank. At a minimum, such planning would have made their resolutions more orderly and less costly to the Deposit Insurance Fund.”
