Regulators issue final rule prioritizing material financial risks

The FDIC and OCC issued a final rule designed to focus examiners’ and institutions’ attention on material financial risks and compliance with banking and banking-related laws and regulations.

Details: Following the release of a proposed rule in October 2025, the final rule:

• Establishes a uniform definition for the term “unsafe or unsound practice” for the purposes of the agencies’ enforcement actions and supervisory activities.

• Creates uniform standards for when and how the agencies may issue matters requiring attention (MRAs) and communicate supervisory observations and other violations of laws and regulations.

• Clarifies how the agencies will tailor their use of the unsafe or unsound practices definition and the MRA standard based on risk factors specific to an institution, including asset size, complexity, and activities.

• Leaves unchanged the standard applicable to institution-affiliated parties.

ICBA View: In a national news release following the release of the proposed rule in October, ICBA commended the agencies and said prioritizing material financial risks over sometimes arbitrary supervisory concerns allows community banks to focus on meeting the needs of their communities.