FDIC OCC announce proposals to streamline regulatory oversight

ICBA commended the FDIC and OCC for issuing proposed rules to prohibit the use of reputation risk by regulators and to revise the supervisory framework for “unsafe or unsound” banking practices.

Reputation Risk Details: The reputation risk proposal would:

• Define “reputation risk” and prohibit the agencies from criticizing or taking adverse action against an institution on the basis of reputation risk.

• Prohibit the agencies from requiring, instructing, or encouraging an institution to close customer accounts or take other actions on the basis of a person or entity’s political, social, cultural, or religious views or beliefs, constitutionally protected speech, or solely on the basis of politically disfavored but lawful business activities perceived to present reputation risk.

• Respond to concerns expressed in President Donald Trump’s executive order on fair banking that the use of reputation risk can be a pretext for restricting law-abiding individuals’ and businesses’ access to financial services on the basis of political or religious beliefs or lawful business activities.

Matters Requiring Attention Details: The joint proposal on unsafe and unsound practices and matters requiring attention would:

• Establish a uniform definition for the term “unsafe or unsound practice” for the purposes of enforcement and supervision.

• Direct bank supervisors to prioritize concerns related to material financial risks over those regarding policies, process, documentation, and other nonfinancial risks.

• Establish uniform standards for when and how the agencies may communicate matters requiring attention, or MRAs, and nonbinding supervisory observations as part of the examination process.

• Require the agencies to tailor their supervisory and enforcement actions and MRAs.

ICBA View: In a national news release, ICBA President and CEO Rebeca Romero Rainey commended the agencies and said prioritizing material financial risks “facilitates a tailored regulatory framework that allows community banks to meet the needs of the local communities in which they’re based.”

Gould Statement: At the FDIC board meeting where the proposals were advanced by the agency, Comptroller of the Currency Jonathan Gould said one of his priorities is supporting community banks. “For too long, regulation and supervision have been insufficiently tailored for community banks, which has hampered their ability to serve our communities and drive economic growth,” he said.

Key Priorities: Proposals designed to advance tiered and proportionate regulations are in line with ICBA’s “Repair, Reform, and Thrive” plan and open letter to the 119th Congress.