UPDATED: Higher asset threshold means 8 banks would be covered under OCC-proposed recovery planning guidelines

Enforceable guidelines for recovery planning standards would apply only to banks having $250 billion or more in total consolidated assets – reducing the estimated number of covered institutions from 25 to eight – under a proposal of the Office of the Comptroller of the Currency (OCC).

The OCC says the proposed increase in the asset-size threshold for these guidelines, originally set in 2016 for federally insured banks, federal savings associations and insured federal branches with $50 billion or more in assets, is consistent with the threshold used to designate banks statutorily required to prepare resolution plans under the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA).

The agency is also proposing to decrease from 18 months to 12 months the timeframe for compliance once a bank hits the $250 billion threshold. “Based upon supervisory experience, the OCC has observed that 12 months is a sufficient period of time for any bank that becomes a covered bank to comply with the Guidelines,” the notice states.

The OCC will accept comments on the proposal until Nov. 5, according to the Federal Register notice.

OCC, in its notice, points out that it gets its authority to enforcing the recovery planning guidelines from the Federal Deposit Insurance (FDI) Act. It published the guidelines in response to lessons learned from the 2008 financial crisis, which “provided valuable lessons about the need for financial institutions to have strong risk governance frameworks, including plans for how to respond to and recover from the financial effects of severe stress. This was particularly true for larger, more complex banks in light of systemic risks and contagion effects that they pose,” the OCC notice states.

The agency applied the 2016 guidelines to institutions with at least $50 billion in assets, the same asset-size threshold used to define “systemically important financial institutions” under the Dodd-Frank Wall Street Reform and Recovery Act (Dodd-Frank).

The OCC, in its notice, reviews the guideline requirements, noting that a bank’s recovery plan should identify the following:

  • quantitative or qualitative indicators of the risk or existence of severe stress that reflect a covered bank’s particular vulnerabilities; and
  • a wide range of credible options that a covered bank could undertake in response to the stress to restore its financial strength and viability.

It says plans should also address procedures for escalating decision-making to senior management or the board of directors, management reports, and communication procedures. The guidelines also reserve authority for OCC to apply the guidelines to a bank below the asset-size threshold “if the agency determines a bank is highly complex or otherwise presents a heightened risk.” Phased-in compliance dates are based on bank size.

The OCC estimates an average 7,548 burden hours for each bank covered by the planning requirements.

OCC Guidelines Establishing Standards for Recovery Planning by Certain Large Insured National Banks, Insured Federal Savings Associations, and Insured Federal Branches ; Technical Amendments