Proposed Rule2024-13960
OCC Guidelines Establishing Standards for Recovery Planning by Certain Large Insured National Banks, Insured Federal Savings Associations, and Insured Federal Branches
Primary source
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Published
July 3, 2024
Issuing agencies
Treasury DepartmentComptroller of the Currency
Abstract
The Office of the Comptroller of the Currency (OCC) is proposing to amend its enforceable recovery planning guidelines (Guidelines) to expand the Guidelines to apply to insured national banks, Federal savings associations, and Federal branches (banks) with average total consolidated assets of $100 billion or more; incorporate a testing standard; and clarify the role of non-financial (including operational and strategic) risk in recovery planning.
Full Text
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<title>Federal Register, Volume 89 Issue 128 (Wednesday, July 3, 2024)</title>
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[Federal Register Volume 89, Number 128 (Wednesday, July 3, 2024)]
[Proposed Rules]
[Pages 55114-55120]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-13960]
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DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
12 CFR Part 30
[Docket ID OCC-2024-0008]
RIN 1557-AF27
OCC Guidelines Establishing Standards for Recovery Planning by
Certain Large Insured National Banks, Insured Federal Savings
Associations, and Insured Federal Branches
AGENCY: Office of the Comptroller of the Currency, Treasury.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Office of the Comptroller of the Currency (OCC) is
proposing to amend its enforceable recovery planning guidelines
(Guidelines) to expand the Guidelines to apply to insured national
banks, Federal savings associations, and Federal branches (banks) with
average total consolidated assets of $100 billion or more; incorporate
a testing standard; and clarify the role of non-financial (including
operational and strategic) risk in recovery planning.
DATES: Comments must be received by August 2, 2024.
ADDRESSES: Commenters are encouraged to submit comments through the
Federal eRulemaking Portal. Please use the title ``OCC Guidelines
Establishing Standards for Recovery Planning by Certain Large Insured
National Banks, Insured Federal Savings Associations, and Insured
Federal Branches'' to facilitate the organization and distribution of
the comments. You may submit comments by any of the following methods:
<bullet> Federal eRulemaking Portal--<a href="http://Regulations.gov">Regulations.gov</a>:
Go to <a href="https://regulations.gov/">https://regulations.gov/</a>. Enter ``Docket ID OCC-2024-0008''
in the Search Box and click ``Search.'' Public comments can be
submitted via the ``Comment'' box below the displayed document
information or by clicking on the document title and then clicking the
``Comment'' box on the top-left side of the screen. For help with
submitting effective comments, please click on ``Commenter's
Checklist.'' For assistance with the <a href="http://Regulations.gov">Regulations.gov</a> site, please call
1-866-498-2945 (toll free) Monday-Friday, 8 a.m.-7 p.m. ET, or email
<a href="/cdn-cgi/l/email-protection#fb899e9c8e979a8f92949588939e978b9f9e8890bb9c889ad59c948d"><span class="__cf_email__" data-cfemail="20524547554c4154494f4e5348454c504445534b604753410e474f56">[email protected]</span></a>.
<bullet> Mail: Chief Counsel's Office, Attention: Comment
Processing, Office of the Comptroller of the Currency, 400 7th Street
SW, Suite 3E-218, Washington, DC 20219.
<bullet> Hand Delivery/Courier: 400 7th Street SW, Suite 3E-218,
Washington, DC 20219.
Instructions: You must include ``OCC'' as the agency name and
``Docket ID OCC-2024-0008'' in your comment. In general, the OCC will
enter all comments received into the docket and publish the comments on
the <a href="http://Regulations.gov">Regulations.gov</a> website without change, including any business or
personal information provided such as name and address information,
email addresses, or phone numbers. Comments received, including
attachments and other supporting materials, are part of the public
record and subject to public disclosure. Do not include any information
in your comment or supporting materials that you consider confidential
or inappropriate for public disclosure.
You may review comments and other related materials that pertain to
this action by the following methods:
<bullet> Viewing Comments Electronically--<a href="http://Regulations.gov">Regulations.gov</a>:
Go to <a href="https://regulations.gov/">https://regulations.gov/</a>. Enter ``Docket ID OCC-2024-0008''
in the Search Box and click ``Search.'' Click on the ``Dockets'' tab
and then the document's title. After clicking the document's title,
click the ``Browse All Comments'' tab. Comments can be viewed and
filtered by clicking on the ``Sort By'' drop-down on the right side of
the screen or the ``Refine Comments Results'' options on the left side
of the screen. Supporting materials can be viewed by clicking on the
``Browse Documents'' tab. Click on the ``Sort By'' drop-down on the
right side of the screen or the ``Refine Results'' options on the left
side of the screen checking the ``Supporting & Related Material''
checkbox. For assistance with the <a href="http://Regulations.gov">Regulations.gov</a> site, please call 1-
866-498-2945 (toll free) Monday-Friday, 8 a.m.-7 p.m. ET, or email
<a href="/cdn-cgi/l/email-protection#27554240524b46534e4849544f424b574342544c6740544609404851"><span class="__cf_email__" data-cfemail="f3819694869f92879a9c9d809b969f8397968098b3948092dd949c85">[email protected]</span></a>.
The docket may be viewed after the close of the comment period in
the same manner as during the comment period.
FOR FURTHER INFORMATION CONTACT: Kimberly Jameson, Lead Expert, Market
Risk, (202) 322-8527; Andra Shuster, Senior Counsel, Karen McSweeney,
Special Counsel, or Priscilla Benner, Counsel, Chief Counsel's Office,
(202) 649-5490; 400 7th Street SW, Washington, DC 20219. If you are
deaf, hard of hearing, or have a speech disability, please dial 7-1-1
to access telecommunications relay services.
SUPPLEMENTARY INFORMATION:
I. Background
Large-scale financial crises, including the 2008 crisis, have
demonstrated the destabilizing effect that severe stress can have on
financial entities, capital markets, the Federal banking system, and
the U.S. and global economies. This is particularly true when a crisis
places severe stress on large, complex financial institutions due to
the systemic and contagion risks that they pose. During the 2008
crisis, the OCC observed that many financial institutions were not
prepared to respond effectively to the financial effects of the severe
stress. The lack of or inadequate planning threatened the viability of
some financial institutions, and many were
[[Page 55115]]
forced to take significant actions without the benefit of a well-
developed plan for recovery.
For the OCC, this experience further highlighted the importance of
strong risk governance frameworks at large, complex banks, including
plans for how to respond quickly and effectively to, and recover from,
the financial effects of severe stress. The agency recognized that
recovery planning would reduce a bank's risk of failure and increase
the likelihood that the bank would return to a position of financial
strength and viability following severe stress. It envisioned recovery
planning--developing and maintaining a comprehensive recovery plan--as
a dynamic and ongoing process that complemented a bank's other risk
governance and planning functions and supported its safe and sound
operation. The OCC expected recovery planning to enhance the focus of a
bank's management and its board of directors (board) on risk
governance, with a view toward lessening the negative effects of and
recovering from future severe stress.
On September 19, 2016, the OCC issued Guidelines Establishing
Standards for Recovery Planning by Certain Large Insured National
Banks, Insured Federal Savings Associations, and Insured Federal
Branches of Foreign Banks (Guidelines).\1\ Under the Guidelines, a bank
subject to the standards (a covered bank) should have a recovery plan
that includes (1) quantitative or qualitative indicators of the risk or
existence of severe stress that reflect its particular vulnerabilities;
(2) a wide range of credible options that it could undertake in
response to the stress to restore its financial strength and viability;
and (3) an assessment and description of how these options would affect
it. The Guidelines provided that a recovery plan should also address
(1) the covered bank's overall organizational and legal entity
structure; (2) procedures for escalating decision-making to senior
management or the board; (3) management reports; (4) communication
procedures; and (5) any other information the OCC communicates in
writing. The Guidelines also set forth the responsibilities of
management and the board with respect to the covered bank's recovery
plan.
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\1\ 81 FR 66791 (Sep. 29, 2016). The Guidelines are codified at
12 CFR part 30, appendix E. They were issued pursuant to section 39
of the Federal Deposit Insurance Act, 12 U.S.C. 1831p-1, which
authorizes the OCC to prescribe enforceable safety and soundness
standards.
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The 2016 Guidelines applied to banks with total consolidated assets
of $50 billion or more. In 2018, the OCC amended the Guidelines to
raise the threshold to $250 billion based on its view, at that time,
that these larger, more complex, and potentially more interconnected
banks presented greater systemic risk to the financial system and would
benefit most from recovery planning.\2\
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\2\ 83 FR 66604 (Dec. 27, 2018).
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In March 2023, several insured depository institutions (IDIs) with
total consolidated assets of $100 billion or more experienced
significant withdrawals of uninsured deposits in response to underlying
weaknesses in their financial position and failed. These institutions
were not subject to recovery planning, which would likely have
bolstered their resilience. For the OCC, these events highlighted the
complexity and interconnectedness of some banks not covered by the
Guidelines: banks with average total consolidated assets between $100
billion and $250 billion. The events, coupled with the OCC's
supervisory experience, made clear the importance of ensuring that
banks in this size range are adequately prepared and have developed a
plan to respond to the financial effects of severe stress, particularly
in light of the contagion effects and systemic risks they may pose. To
address this issue, the OCC is proposing to expand the Guidelines to
apply to banks with average total consolidated assets of $100 billion
or more.
In addition, during the OCC's almost 10 years of supervisory
experience with the Guidelines, the agency has examined covered banks'
recovery planning processes and reviewed numerous recovery plans. Based
on this experience, the OCC has identified areas where the Guidelines
should be strengthened and, as such, proposes to amend them by
establishing a testing standard and increasing the focus on non-
financial (including operational and strategic) risk.
II. Proposed Changes
A. Covered bank threshold. The current Guidelines generally apply
to banks with average total consolidated assets of $250 billion or
more. Based on the OCC's observations during the 2023 financial
institution failures, the agency proposes to expand the Guidelines to
apply to banks with average total consolidated assets of $100 billion
or more.\3\ To make this change, the OCC proposes to revise the
definition of ``covered bank'' in paragraph I.E.3. of the Guidelines.
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\3\ The proposed threshold would also be consistent with the
Federal Deposit Insurance Corporation's (FDIC) proposed amendments
to its resolution planning rule, which would require covered IDIs
with $100 billion or more in total assets to submit full resolution
plans. 88 FR 64579 (Sept. 19, 2023).
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The OCC is also proposing a clarifying change to the definition of
``average total consolidated assets'' in paragraph I.E.1. Currently,
the Guidelines define ``average total consolidated assets'' as ``the
average total consolidated assets of the bank or the covered bank,'' as
reported on the bank's or the covered bank's Consolidated Reports of
Condition and Income (Call Report) for the four most recent consecutive
quarters. The agency proposes to change the definition to refer to the
average ``of'' total consolidated assets of the bank or covered bank.
This change is intended to clarify that calculating ``average total
consolidated assets'' for purposes of the Guidelines is based on the
``total assets'' line of the Call Report, not the ``average total
consolidated assets'' line of the Call Report.\4\ The clarifying change
may affect the quarter in which a bank becomes a covered bank and is
consistent with the OCC's Heightened Standards Guidelines.\5\
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\4\ Compare Schedule RC, item 12 and Schedule RC-R, item 27 of
the Call Report.
\5\ 12 CFR part 30, appendix D.
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Paragraph I.C.1. of the current Guidelines, ``Reservation of
Authority,'' provides that the OCC has the discretion to apply the
Guidelines, in whole or in part, to a bank with average total
consolidated assets of less than $250 billion if the agency determines
that the bank is highly complex or otherwise presents a heightened risk
that warrants the application of the Guidelines.\6\ Consistent with the
proposed threshold change, the OCC proposes a conforming change to the
Reservation of Authority paragraph, which would allow the agency to
apply the Guidelines to a bank with average total consolidated assets
of less than $100 billion if the agency determines the bank is highly
complex or otherwise presents a heightened risk that warrants
application of the Guidelines.\7\
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\6\ Paragraph I.C.1.a.
\7\ The OCC does not propose changes to its reservation of
authority to determine that compliance should not be required for a
covered bank in paragraph I.C.1.b. of the Guidelines because this
section does not specifically reference a bank's asset size.
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Question: The OCC invites comments on the proposed $100 billion
threshold. Alternatively, should the OCC expand the Guidelines further
(e.g., to all banks or to banks with $50 billion or more in average
total consolidated assets), adopt a different threshold between $100
billion and $250 billion, or retain the $250 billion threshold? Why?
[[Page 55116]]
B. Testing. As stated above, the OCC has almost 10 years of
experience in administering the Guidelines, including reviewing covered
banks' recovery plans. During this period, the agency has observed that
recovery plans would benefit from testing, which would aid covered
banks in proactively identifying and addressing any weaknesses or
deficiencies in their recovery plans before they experience severe
stress. Testing would help ensure that a covered bank's recovery plan
will be an effective tool that can realistically help restore the bank
to financial strength and viability in response to severe stress. Not
surprisingly, testing is already a key component of other regulatory
frameworks addressing the stress continuum (e.g., contingency funding
planning \8\ and stress testing \9\). In addition, the FDIC has
proposed amendments to its resolution planning rule to incorporate a
testing requirement.\10\
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\8\ See 75 FR 13656 (March 22, 2010); Addendum to the
Interagency Policy Statement on Funding and Liquidity Risk
Management: Importance of Contingency Funding Plan (July 28, 2023).
\9\ See 12 CFR part 46.
\10\ 88 FR 64579 (Sept. 19, 2023).
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For these reasons, the OCC proposes to revise the Guidelines to
include a testing provision as a new paragraph II.D. Under the proposed
testing provision, a covered bank should test its overall recovery
plan, and each element of the plan, to ensure that it will be an
effective tool during periods of severe stress.\11\ To meet this
standard, a covered bank may simulate severe financial and non-
financial stress scenarios, such as the scenarios used to develop the
plan, to confirm that the plan is likely to work as intended when the
covered bank is experiencing severe stress. This testing should
include, for example, ensuring that the plan's triggers appropriately
reflect the covered bank's particular vulnerabilities and will, in
practice, provide the covered bank with timely notice of a continuum of
increasingly severe stress, ranging from warnings of the likely
occurrence of severe stress to the actual existence of severe stress.
Testing should also enable management and the board to verify that the
bank has identified credible options and is adequately prepared to
carry out these options, as needed, during a period of severe stress.
Testing should be sufficient to provide management and the board with
similar assurances regarding the other elements of the plan and,
ultimately, the plan as a whole. Although the proposal does not include
a specific testing format or methodology, testing should be risk-based
and reflect the covered bank's size, risk profile, activities, and
complexity.
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\11\ As set forth in paragraph II.B. of the Guidelines, the
elements of a recovery plan are Overview of covered bank; Triggers;
Options for recovery; Impact assessments; Escalation procedures;
Management reports; Communication procedures; and Other information.
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Question: The OCC invites comment on the proposed testing standard,
including the following questions:
<bullet> Should the OCC be more specific about how to test a
recovery plan to validate whether the plan would effectively facilitate
a covered bank's recovery from severe financial or non-financial
stress? For example, should the OCC provide that a covered bank test
the plan using a specific number of stress scenarios? If so, how many
scenarios would be appropriate? Should the OCC provide that covered
banks utilize different scenarios each year? Should the OCC provide
that a covered bank include a quantitative and qualitative analysis as
part of the testing provision?
<bullet> How would a covered bank implement testing for recovery
options? Are there certain options which would be difficult or
impossible to test?
<bullet> How would a covered bank implement testing for impact
assessments? For example, would it be possible to test the effect on
material entities, critical operations, and core business lines? Should
impact assessments be scoped out of the testing provision? If so, why?
<bullet> Is the proposed scope of testing appropriate? Are there
other aspects of a covered bank's recovery plan or recovery planning
process that the covered bank should test, and if so, what are those?
Should the OCC narrow the testing standard? How and why?
<bullet> How would a covered bank implement testing in its recovery
planning process? For example, would a covered bank first develop (or
update) its recovery plan and then separately test the completed plan,
or would a covered bank integrate testing into its development (or
updating) process? Please explain.
With respect to the frequency of testing, the OCC proposes that a
covered bank test its recovery plan periodically but not less than
annually, which aligns with management and board responsibilities to
review a covered bank's recovery plan at least annually, under
paragraphs III.A and III.B. of the Guidelines, respectively. As such,
the proposed testing frequency would ensure that management and the
board can consider the results of testing during their review. While
the OCC expects that a covered bank would test each element of its
recovery plan on an annual cycle, the agency does not expect that, for
example, a covered bank would test all triggers or all options during
each annual cycle. Rather, as noted above, annual testing should be
risk-based. In addition, to provide covered banks with flexibility to
engage in continuous or regular testing, the proposal also permits a
covered bank to engage in periodic testing during an annual cycle.
Finally, in the event that testing reveals weaknesses or deficiencies
in a recovery plan, the proposal provides that a covered bank should
revise its recovery plan as appropriate following testing.
Question: The OCC invites comment on the proposed frequency of
testing, including whether annual testing is appropriate, as well as
whether and how this testing frequency will aid management and the
board in fulfilling their recovery planning responsibilities.
Alternatively, should the Guidelines provide for periodic testing
without a specific frequency? Should the Guidelines also provide for
testing in response to a material change to the recovery plan?
Question: The OCC invites comment on whether the OCC should provide
additional clarity regarding how covered banks should address
weaknesses and deficiencies identified during testing.
C. Non-financial risk. In the OCC's experience with covered banks'
implementation of the Guidelines, banks have generally been successful
in considering and addressing financial risks in their recovery plans.
For example, many covered banks' recovery plans include triggers which
cover changes to the bank's financial position, such as triggers for
profitability, funding sources, liquidity ratios, and capital ratios.
The OCC has observed, however, that covered banks have been less
consistent in their consideration of non-financial risk, such as
operational and strategic risks. As some covered banks have indicated,
this inconsistent approach to non-financial risk may be because the
goal of recovery planning is to return a covered bank to a position of
financial strength and viability in the event of severe stress.
Financial risk is, of course, critical to recovery planning. However,
focusing a recovery plan exclusively on financial risks while
neglecting non-financial risks overlooks the very real threats that
non-financial risks can pose to a bank's financial strength and
viability. For example, banks face elevated levels of risk from an
increasingly complex operational and strategic environment. They are
undergoing rapid and significant
[[Page 55117]]
changes in an effort to innovate, digitize, and meet rising consumer
demands; to optimize risk management practices; and to respond to
externalities such as economic and environmental uncertainties and
financial pressures. These risks can lead to severe non-financial
stress that affects a bank's financial strength and viability.\12\
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\12\ The Guidelines already recognize this fact, insofar as the
definition of ``recovery'' refers to ``financial or operational
stress.'' However, as noted above, the OCC believes that this issue
warrants additional clarity.
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To ensure that covered banks' appropriately address non-financial
risks in their recovery plans, including by identifying non-financial
stress and triggers, the OCC proposes certain changes to the
Guidelines. The first proposed change is to paragraph II.A., which
currently states that each covered bank should develop and maintain a
recovery plan that is specific to and appropriate for its individual
size, risk profile, activities, and complexity, including the
complexity of its organizational and legal entity structure. The OCC
proposes to add language to this paragraph stating that a covered
bank's recovery plan should appropriately consider both financial risk
and non-financial risk (including operational and strategic risk). The
added reference to financial risk is not because covered banks have not
been considering this type of risk but to highlight that both types of
risk should be addressed. The OCC also proposes conforming changes to
the definitions of ``recovery'' and ``trigger'' in paragraphs I.E.4.
and I.E.6., respectively, and to the recovery plan elements of
``trigger'' and ``impact assessment'' in paragraphs II.B.2. and
II.B.4., respectively. These conforming changes are also intended to
highlight the importance of both financial and non-financial risks
throughout the recovery planning process.
The OCC is not proposing any changes to the ``options for
recovery'' element in paragraph II.B.3. of the Guidelines, which
provides that recovery plan ``should explain how the covered bank would
carry out each option and describe the timing required for carrying out
each option.'' The OCC believes, however, it is important to emphasize
that this process should include an understanding of, and plan for
mitigating, the non-financial challenges and risks, including
operational challenges and risks, associated with executing each
recovery option during severe stress. Without this, a covered bank's
management and board cannot accurately assess whether the options
identified in the recovery plan are, in fact, credible options that the
covered bank could undertake to restore financial strength and
viability.
Finally, paragraph II.C. of the Guidelines, ``Relationship to other
processes; coordination with other plans,'' provides that a covered
bank's recovery plan should be integrated into its other risk
governance functions and aligned with its other plans. This provision
is intended to make clear that recovery planning should complement, and
not replace, these risk governance and planning functions at covered
banks, including those that address non-financial risks. The paragraph
lists examples of such other plans; to provide an additional example of
an operational risk plan, the OCC proposes to add a reference to
``resilience programs'' in paragraph II.C.
Question: The OCC invites comment on its proposal to incorporate
non-financial risks into the Guidelines, including the following:
<bullet> Are ``financial'' and ``non-financial'' risks sufficiently
clear? Should the Guidelines define these terms or otherwise include
more specificity? For example, should the OCC identify or define
specific types of financial and non-financial risk, such as by
incorporating the risk types and corresponding definitions used in the
Comptroller's Handbook or another source? Please explain.
<bullet> Should the OCC revise any other provisions of the
Guidelines, including the definition of ``recovery plan'' or any of the
other elements of a recovery plan, to incorporate non-financial risk?
If so, how?
<bullet> Is the proposal sufficiently clear about the relationship
between non-financial risk and recovery planning? Is it sufficiently
clear that inclusion of non-financial risk in a recovery plan should
not replace a covered bank's other non-financial risk governance
practices, such as its business continuity and operational resilience
planning?
D. Compliance. The OCC understands that it would take time for
covered banks to implement the changes discussed above, particularly
for banks that are not currently covered by the Guidelines but would
become covered banks based on the proposed threshold change. To this
end, the agency proposes to amend paragraph I.B. of the Guidelines,
entitled ``Compliance date,'' to provide the banks with sufficient
time. Specifically, a bank that is a covered bank under the current
Guidelines would have 12 months from the effective date of the
amendments to comply with the changes. These banks would continue to be
obligated to comply with the current Guidelines during this 12-month
period.
Question: The OCC invites comment on whether a 12-month compliance
date would be sufficient for a bank that is already a covered bank.
Should the OCC adopt shorter a compliance date, such as 3 or 6 months,
or a longer one, such as 18 or 24 months, for these banks? Should the
OCC establish different compliance dates for updating a recovery plan
to address non-financial risks and for testing the plan? If so, what
compliance dates would be appropriate? Please explain.
For a bank that has $100 billion or more but less than $250 billion
in average total consolidated assets on the effective date of the
amendments to the Guidelines, the proposal provides that the bank
should comply with the Guidelines within 12 months of the effective
date, except for the testing requirements with which the bank should
comply within 18 months. A financial institution that is not a covered
bank on the effective date of the amended Guidelines but that
subsequently becomes a covered bank would continue to have 12 months
from the date on which it becomes a covered bank to comply with the
Guidelines, except that it would have 18 months to comply with the
testing requirements.\13\
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\13\ A financial institution could become a covered bank after
the effective date of the amended Guidelines, for example, if its
average total consolidated assets grow to or above the threshold, if
it is a State bank with average total consolidated assets of $100
billion or more that converts to an OCC charter, or through the
OCC's exercise of its reservation of authority under section I.C.
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Question: The OCC invites comments on these proposed compliance
dates. Would a 12-month compliance date provide a bank or other
financial institution that is newly covered by the Guidelines with
adequate time to develop a plan? Should the OCC adopt a shorter
compliance date, such as 3 or 6 months, or a longer one, such as 18 or
24 months? How would this change if the OCC were to adopt a different
threshold? Is 6 additional months an appropriate timeframe for testing,
or would a shorter or longer timeframe be appropriate? Alternatively,
should the OCC establish one compliance date for both developing and
testing a recovery plan? Please explain.
Question: Should the OCC include an additional reservation of
authority that would permit it to apply the Guidelines to a bank or
covered bank on a timeframe different than the otherwise-applicable
compliance dates (e.g., following a merger or acquisition)? If so, what
factors should the OCC consider
[[Page 55118]]
when deciding whether to exercise this reservation of authority?
III. Comment Invitation
In addition to the specific questions asked above, the OCC invites
comment on all aspects of the proposed revisions to the Guidelines.
IV. Regulatory Analysis
Paperwork Reduction Act of 1995
Under the Paperwork Reduction Act of 1995 (PRA),\14\ the OCC may
not conduct or sponsor, and a respondent is not required to respond to,
an information collection unless it displays a currently valid Office
of Management and Budget (OMB) control number. This notice of proposed
rulemaking includes changes to an approved collection of information
pursuant to the provisions of the PRA. The OCC submitted the
information collections contained in this notice of proposed rulemaking
to OMB for review and approval, under section 3507(d) of the PRA and
Sec. 1320.11 of OMB's implementing regulations (5 CFR part 1320).
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\14\ 44 U.S.C. 3501-3521.
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The Guidelines contain information collections previously approved
by OMB, which are found in 12 CFR part 30, appendix E, sections II.B.,
II.C., and III. Section II.B. specifies the elements of the recovery
plan, including an overview of the covered bank; triggers; options for
recovery; impact assessments; escalation procedures; management
reports; communication procedures; and any other information the OCC
communicates in writing. Section II.C. addresses the relationship of
the plan to other covered bank processes and coordination with other
plans, including the processes and plans of its bank holding company.
Section III outlines management's and the board's responsibilities.
The proposed rulemaking contains additional information
collections. Under the proposal, the threshold for applying the
Guidelines to a bank would be reduced from $250 billion to $100 billion
in average total consolidated assets. The proposal would also establish
a testing standard, which would provide that a bank should test its
overall recovery plan and each element of the plan. Additionally, the
proposal would clarify the role of non-financial (including operational
and strategic) risk in recovery planning.
The following revised information collection was submitted to OMB
for review.
Title: OCC Guidelines Establishing Standards for Recovery Planning
by Certain Large Insured National Banks, Insured Federal Savings
Associations, and Insured Federal Branches.
OMB Control No.: 1557-0333.
Affected Public: Businesses or other for-profit organizations.
Estimated Burden:
Frequency of Response: On occasion.
Total Number of Respondents: 21.
Total Burden per Respondent: 32,017 hours.
Total Burden for Collection: 672,360 hours.
Comments are invited on: (a) Whether the collection of information
is necessary for the proper performance of the functions of the OCC,
including whether the information has practical utility; (b) The
accuracy of the OCC's estimate of the burden of the collection of
information; (c) Ways to enhance the quality, utility, and clarity of
the information to be collected; (d) Ways to minimize the burden of the
collection on respondents, including through the use of automated
collection techniques or other forms of information technology; and (e)
Estimates of capital or start-up costs and costs of operation,
maintenance, and purchase of services to provide information.
Regulatory Flexibility Act
In general, the Regulatory Flexibility Act (RFA) \15\ requires an
agency, in connection with a proposed rule, to prepare an Initial
Regulatory Flexibility Analysis describing the impact of the rule on
small entities (defined by the U.S. Small Business Administration for
purposes of the RFA to include commercial banks and savings
institutions with total assets of $850 million or less and trust
companies with total assets of $47 million or less). However, under
section 605(b) of the RFA, this analysis is not required if an agency
certifies that the proposed rule would not have a significant economic
impact on a substantial number of small entities and publishes its
certification and a short explanatory statement in the Federal Register
along with its proposed rule.
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\15\ 5 U.S.C. 601 et seq.
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The OCC currently supervises approximately 947 IDIs \16\ of which
636 are small entities.\17\ The proposed rule would not impact any
small entities because it would only apply to IDIs with average total
consolidated assets of $100 billion or more. Accordingly, the OCC
certifies that the proposed rule, if implemented, would not have a
significant economic impact on a substantial number of small entities.
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\16\ Based on data accessed using FINDRS on May 23, 2024.
\17\ Consistent with the General Principles of Affiliation, 13
CFR 121.103(a), the OCC counts the assets of affiliated financial
institutions when determining if it should classify an institution
as a small entity. The OCC used December 31, 2023, to determine size
because a ``financial institution's assets are determined by
averaging the assets reported on its four quarterly financial
statements for the preceding year.'' See footnote 8 of the U.S.
Small Business Administration's Table of Standards.
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Unfunded Mandates Reform Act of 1995
The OCC analyzed the proposed rule under the factors set forth in
the Unfunded Mandates Reform Act of 1995 (UMRA).\18\ Under this
analysis, the OCC considered whether the proposed rule includes a
Federal mandate that may result in the expenditure by State, local, and
Tribal governments, in the aggregate, or by the private sector, of $100
million or more in any one year (adjusted for inflation, currently $183
million). The OCC has determined that expenditures to comply with
proposed rule's mandates would be approximately $86.7 million.
Therefore, the OCC concludes that the proposed rule would not result in
an expenditure of $183 million or more annually by State, local, and
Tribal governments, or by the private sector. Accordingly, the OCC has
not prepared the written statement described in section 202 of the
UMRA.
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\18\ 2 U.S.C. 1532.
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Riegle Community Development and Regulatory Improvement Act of 1994
Pursuant to section 302(a) of the Riegle Community Development and
Regulatory Improvement Act of 1994,\19\ in determining the effective
date and administrative compliance requirements for new regulations
that impose additional reporting, disclosure, or other requirements on
insured depository institutions, the OCC will consider, consistent with
the principles of safety and soundness and the public interest: (1) any
administrative burdens that the proposed rule would place on depository
institutions, including small depository institutions and customers of
depository institutions and (2) the benefits of the proposed rule. The
OCC requests comment on any administrative burdens that the proposed
rule would place on depository institutions, including small depository
institutions and their customers, and the benefits of the proposed rule
that the OCC should consider in determining the effective date and
administrative compliance requirements for a final rule.
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\19\ 12 U.S.C. 4802(a).
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[[Page 55119]]
Providing Accountability Through Transparency Act of 2023
The Providing Accountability Through Transparency Act of 2023 \20\
requires that a notice of proposed rulemaking include the internet
address of a summary of not more than 100 words in length of a proposed
rule, in plain language, that shall be posted on the internet website
<a href="http://www.regulations.gov">www.regulations.gov</a>.
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\20\ 12 U.S.C. 553(b)(4).
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The Office of the Comptroller of the Currency is proposing to amend
its enforceable recovery planning guidelines to expand them to apply to
insured national banks, Federal savings associations, and Federal
branches with average total consolidated assets of $100 billion or
more; incorporate a testing standard; and clarify the role of non-
financial (including operational and strategic) risk in recovery
planning.
List of Subjects in 12 CFR Part 30
Banks, Banking, Consumer protection, National banks, Privacy,
Safety and soundness, Reporting and recordkeeping requirements.
Authority and Issuance
For the reasons set forth in the preamble, and under the authority
of 12 U.S.C. 93a, chapter I of title 12 of the Code of Federal
Regulations is proposed to be amended as follows:
PART 30--SAFETY AND SOUNDESS STANDARDS
0
1. The authority citation for part 30 continues to read as follows:
Authority: 12 U.S.C. 1, 93a, 371, 1462a, 1463, 1464, 1467a,
1818, 1828, 1831p-1, 1881-1884, 3102(b) and 5412(b)(2)(B); 15 U.S.C.
1681s, 1681w, 6801, and 6805(b)(1).
0
2. Amend appendix E by:
0
a. Revising and republishing paragraph I.B.
0
b. In paragraph I.C.1.a, removing the text ``$250 billion'' and adding
the text ``$100 billion'' in its place; and
0
c. Revising and republishing paragraphs I.E. and II.
The revisions read as follows:
Appendix E to Part 30--OCC Guidelines Establishing Standards for
Recovery Planning by Certain Large Insured National Banks, Insured
Federal Savings Associations, and Insured Federal Branches
* * * * *
I. Introduction
* * * * *
B. Compliance date.
1. A covered bank with average total consolidated assets,
calculated according to paragraph I.E.1. of this appendix, equal to
or greater than $250 billion as of [EFFECTIVE DATE OF FINAL RULE]
should be in compliance with this appendix on [EFFECTIVE DATE OF
FINAL RULE] except for paragraph II.D. of this appendix and the
amended provisions on non-financial risk, with which the bank should
be in compliance by 12 months from [EFFECTIVE DATE OF FINAL RULE].
2. A covered bank with average total consolidated assets,
calculated according to paragraph I.E.1. of this appendix, equal to
or greater than $100 billion but less than $250 billion as of
[EFFECTIVE DATE OF FINAL RULE] should be in compliance with this
appendix on 12 months from [EFFECTIVE DATE OF FINAL RULE], except
for paragraph II.D. of this appendix with which the covered bank
should be in compliance by 18 months from [EFFECTIVE DATE OF FINAL
RULE].
3. A financial institution that is not a covered bank as of
[EFFECTIVE DATE OF FINAL RULE] but which subsequently becomes a
covered bank should comply with this appendix within 12 months of
becoming a covered bank, except for paragraph II.D. of this appendix
with which the covered bank should be in compliance by 18 months of
becoming a covered bank.
* * * * *
E. Definitions.
1. Average total consolidated assets means the average of total
consolidated assets of the bank or the covered bank, as reported on
the bank's or the covered bank's Consolidated Reports of Condition
and Income for the four most recent consecutive quarters.
2. Bank means any insured national bank, insured Federal savings
association, or insured Federal branch of a foreign bank.
3. Covered bank means any bank:
a. With average total consolidated assets equal to or greater
than $100 billion;
b. With average total consolidated assets of less than $100
billion if the bank was previously a covered bank, unless the OCC
determines otherwise; or
c. With average total consolidated assets less than $100
billion, if the OCC determines that such bank is highly complex or
otherwise presents a heightened risk as to warrant the application
of this appendix pursuant to paragraph I.C.1.a. of this appendix.
4. Recovery means timely and appropriate action that a covered
bank takes to remain a going concern when it is experiencing or is
likely to experience considerable financial and non-financial
stress. A covered bank in recovery has not yet deteriorated to the
point where liquidation or resolution is imminent.
5. Recovery plan means a plan that identifies triggers and
options for responding to a wide range of severe internal and
external stress scenarios to restore a covered bank that is in
recovery to financial strength and viability in a timely manner. The
options should maintain the confidence of market participants, and
neither the plan nor the options may assume or rely on any
extraordinary government support.
6. Trigger means a quantitative or qualitative indicator of the
risk or existence of severe financial and non-financial stress, the
breach of which should always be escalated to senior management or
the board of directors (or appropriate committee of the board of
directors), as appropriate, for purposes of initiating a response.
The breach of any trigger should result in timely notice accompanied
by sufficient information to enable management of the covered bank
to take corrective action.
II. Recovery Plan
A. Recovery plan. Each covered bank should develop and maintain
a recovery plan that is specific to that covered bank and
appropriate for its individual size, risk profile, activities, and
complexity, including the complexity of its organizational and legal
entity structure. When developing and maintaining its recovery plan,
each covered bank should appropriately consider both financial risk
and non-financial risk (including operational and strategic risk).
B. Elements of recovery plan. A recovery plan under paragraph
II.A. of this appendix should include the following elements:
1. Overview of covered bank. A recovery plan should describe the
covered bank's overall organizational and legal entity structure,
including its material entities, critical operations, core business
lines, and core management information systems. The plan should
describe interconnections and interdependencies:
(i) Across business lines within the covered bank;
(ii) With affiliates in a bank holding company structure;
(iii) Between a covered bank and its foreign subsidiaries; and
(iv) With critical third parties.
2. Triggers. A recovery plan should identify financial and non-
financial triggers that appropriately reflect the covered bank's
particular vulnerabilities.
3. Options for recovery. A recovery plan should identify a wide
range of credible options that a covered bank could undertake to
restore financial strength and viability, thereby allowing the bank
to continue to operate as a going concern and to avoid liquidation
or resolution. A recovery plan should explain how the covered bank
would carry out each option and describe the timing required for
carrying out each option. The recovery plan should specifically
identify the recovery options that require regulatory or legal
approval.
4. Impact assessments. For each recovery option, a covered bank
should assess and describe how the option would affect the covered
bank. This impact assessment and description should specify the
procedures the covered bank would use to maintain the financial
strength and viability of its material entities, critical
operations, and core business lines for each recovery option. For
each option, the recovery plan's impact assessment should address
the following:
a. The effect on the covered bank's capital, liquidity, funding,
and profitability;
b. The effect on the covered bank's material entities, critical
operations, and core business lines, including reputational impact;
c. The effect on the covered bank's risk profile as a result of
changes to its financial and non-financial risk; and
[[Page 55120]]
d. Any legal or market impediment or regulatory requirement that
must be addressed or satisfied in order to implement the option.
5. Escalation procedures. A recovery plan should clearly outline
the process for escalating decision-making to senior management or
the board of directors (or an appropriate committee of the board of
directors), as appropriate, in response to the breach of any
trigger. The recovery plan should also identify the departments and
persons responsible for executing the decisions of senior management
or the board of directors (or an appropriate committee of the board
of directors).
6. Management reports. A recovery plan should require reports
that provide senior management or the board of directors (or an
appropriate committee of the board of directors) with sufficient
data and information to make timely decisions regarding the
appropriate actions necessary to respond to the breach of a trigger.
7. Communication procedures. A recovery plan should provide that
the covered bank notify the OCC of any significant breach of a
trigger and any action taken or to be taken in response to such
breach and should explain the process for deciding when a breach of
a trigger is significant. A recovery plan also should address when
and how the covered bank will notify persons within the organization
and other external parties of its action under the recovery plan.
The recovery plan should specifically identify how the covered bank
will obtain required regulatory or legal approvals.
8. Other information. A recovery plan should include any other
information that the OCC communicates in writing directly to the
covered bank regarding the covered bank's recovery plan.
C. Relationship to other processes; coordination with other
plans. The covered bank should integrate its recovery plan into its
risk governance functions. The covered bank also should align its
recovery plan with its other plans, such as its strategic;
operational (including business continuity and resilience program);
contingency; capital (including stress testing); liquidity; and
resolution planning. The covered bank's recovery plan should be
specific to that covered bank. The covered bank also should
coordinate its recovery plan with any recovery and resolution
planning efforts by the covered bank's holding company, so that the
plans are consistent with and do not contradict each other.
D. Testing. Each covered bank should test its recovery plan
periodically but not less than annually. The test should validate
the effectiveness of the recovery plan, including each element set
forth in paragraph II.B. of this appendix. Each covered bank should
revise its recovery plan as appropriate following completion of the
test.
* * * * *
Michael J. Hsu,
Acting Comptroller of the Currency.
[FR Doc. 2024-13960 Filed 7-2-24; 8:45 am]
BILLING CODE 4810-33-P
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This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.