On October 21, the OCC
issued its
final guidelines meant to strengthen recovery planning for large insured banks. The guidelines were a response to significant withdrawals of uninsured deposits in March 2023 that led to the decline of several institutions with assets of $100 billion or more. The guidelines lowered the threshold for “covered banks” from $250 billion to $100 billion in average total consolidated assets, reflecting the OCC’s observation that banks of this size posed significant risks. The guidelines also incorporated a testing standard to ensure recovery plans are effective and realistic in restoring financial strength during severe stress.
The guidelines mandated that covered banks develop and maintain recovery plans specific to their size, risk profile, activities, and complexity. These plans must include triggers for financial and non-financial stress, a range of credible recovery options, and impact assessments detailing how each option would affect the bank’s capital, liquidity, and overall risk profile. To validate the effectiveness of recovery plans, covered banks must conduct periodic testing. This testing should be appropriate for the bank’s individual characteristics and confirm that the plan can realistically restore the bank to financial strength and viability. The OCC believes such testing will help banks proactively identify and address any weaknesses or deficiencies in their recovery plans. Compliance begins on January 1, 2025, when the new rules go into effect.
