Bank enforcement manual revision targets larger, complex banks with ‘persistent weaknesses’

How the national bank regulator determines if a larger, more complex bank has persistent weaknesses, and possible additional actions the agency may take to address those, are reflected in revisions to the manual on bank enforcement released by the agency Thursday.

In a release, the Office of the Comptroller of the Currency (OCC) said the revisions to its policies and procedures manual (PPM) 5310-3, “Bank Enforcement Actions and Related Matters,” now includes “Appendix C: Actions Against Banks With Persistent Weaknesses.” The appendix, the OCC said, provides greater transparency and clarity about how the OCC determines if a bank has persistent weaknesses and the possible additional actions the agency may take to address them. It is focused, the agency said, on larger and more complex banks the it supervises.

The manual, the OCC said, describes actions the OCC may take against banks that exhibit persistent weaknesses. Those could include, the agency said, additional requirements and restrictions, such as requirements that a bank improve its capital or liquidity position, as well as restrictions on the bank’s growth, business activities, or payments of dividends.

The agency also may require a bank to simplify or reduce its operations, as warranted, including that the bank reduce its assets, divest subsidiaries or business lines, or exit from one or more markets of operation, the OCC said.

In a release, Acting Comptroller of the Currency Michael Hsu asserted that the revised manual promotes strong management by clarifying that a bank’s inability to correct persistent weaknesses will result in proportionate, fair, and appropriate consequences, including growth restrictions and divestitures when warranted.

“These guardrails are especially important today, as banks grow to better serve their communities, improve their competitiveness, and achieve economies of scale,” Hsu said. “Well-managed banks provide invaluable support to our economy, and this revised policy promotes this result.”

OCC Bulletin 2023-16, “OCC Enforcement Actions: Revised Policies and Procedures Manual for Bank Enforcement Actions and Related Matters”