Only the very largest banks – those with $700 billion in assets or more – would be subject to “heightened standards” for gauging threats to the financial system under a proposal issued Tuesday by the national bank regulator.
The Office of the Comptroller of the Currency (OCC) said the proposal is intended to “reduce regulatory burden while refocusing the guidelines on institutions whose size, complexity, and risk profile pose the greatest risk to the banking system.” The agency said it has developed the requisite track record in gauging both the benefits, and shortcomings, of the rule.
The proposal also requests comments on other potential revisions to the guidelines, the OCC said.
“Heightened standards” were adopted by the agency in 2014 (and amended periodically since then). The standards call on banks and savings institutions to “stablish and adhere to a formal, written risk governance framework that includes well-defined risk management roles and responsibilities for front line units, independent risk management, and internal audit.”
When adopted in 2014, the rule applied to banks with $50 billion or more in assets. According to the OCC, the rule was adopted in the wake of the 2008 financial crisis, which it said “demonstrated the destabilizing effect that large, interconnected financial companies can have on the national economy, capital markets, and the overall financial stability of the banking system.”
However, the OCC contended that since then, it has developed “significant experience regarding the burdens and benefits of the Guidelines on covered banks.
“Considering the extreme prescriptiveness of the Guidelines and their associated burden on covered banks, the OCC believes that the standards may only be justified for the largest and most complex institutions as their size, complexity, and risk profile pose the greatest risk to financial stability and the banking system,” the agency said.
Comments are due 60 days after the proposal’s publication in the Federal Register.
OCC Requests Comments on Proposed Amendments to Heightened Standards