The Office of the Comptroller of the Currency today proposed a new rule to expand its enforceable recovery planning guidelines to national banks, federal savings associations and federal branches with at least $100 billion in assets, down from the current limit of $250 billion. The proposed revisions also would create a new testing standard for recovery plans and require that banks consider the role of operational, strategic and other nonfinancial risk in those plans, according to the agency.
In the proposed rulemaking, the OCC cites last year’s failure of Silicon Valley Bank and two other institutions as a major reason for the revisions. “The events, coupled with the OCC’s supervisory experience, made clear the importance of ensuring that banks in [the $100 billion-$250 billion] size range are adequately prepared and have developed a plan to respond to the financial effects of severe stress, particularly in light of the contagion effects and systemic risks they may pose,” the agency said.
Among the proposed revisions is a change to the definition of “average total consolidated assets” to instead be based on the “total assets” line in an institution’s call report. The change may affect the quarter in which a bank becomes a covered bank, the OCC said. Another change is the proposed testing provision, which would require covered banks to test their overall recovery plans “to ensure that it will be an effective tool during periods of severe stress.” The guidelines would not mandate what form that testing takes other than it “should be risk-based and reflect the covered bank’s size, risk profile, activities and complexity.”
Finally, recovery plans would be required to consider both financial risk and nonfinancial risk, and identify nonfinancial stress and triggers. Banks would have a year to comply with the guidelines once they are finalized, although they will be given 18 months to comply with the testing requirements.
Editor’s note: This article has been updated to correct the asset size at which banks are covered by the proposed rulemaking.
