On June 24, the Office of the Comptroller of the Currency (OCC) announced it is requesting comments on proposed amendments to its recovery planning guidelines. A recovery plan’s purpose is to provide a covered bank with a framework to effectively and efficiently address the financial effects of severe stress events and avoid failure or resolution. Among other things, the proposed amendments aim to expand the guidelines to apply to banks with average total consolidated assets between $100 billion and $250 billion. The proposal also seeks to incorporate a testing standard and clarify the role of non-financial risks in recovery planning.

Additional highlights include:

• A new testing provision would be added requiring banks to test their recovery plans periodically, but not less than annually. The OCC’s proposal includes a provision for regular testing of recovery plans to proactively identify and address any weaknesses. This testing could involve simulating stress scenarios and should verify that plans are properly calibrated to provide timely notice of increasingly severe stress.
• Banks would need to consider both financial and non-financial risks in their recovery plans (such as operational and strategic risks related to “rapid and significant changes in banks’ effort to innovate, digitize, and meet rising consumer demands.).
• Banks currently covered by the guidelines would have 12 months from the effective date of the proposal to comply with the new changes.
• Banks newly covered by the guidelines would have 12 months from the effective date to develop a recovery plan and 18 months to comply with testing requirements.

The OCC’s proposal was hinted as recently as last month, when acting Comptroller of the Currency Michael Hsu discussed the financial stability benefits of recovery planning, suggesting that more banks in the $100 billion to $250 billion range should be expected to have recovery plans. Recovery plans are designed to identify potential actions that banks can take to stabilize themselves during severe stress events.

The OCC invites comments on various aspects of the proposal, including the appropriateness of the $100 billion threshold; the specifics of the testing standards and frequency; the incorporation of non-financial risks into recovery planning; and the proposed compliance dates and any additional reservations of authority.

The OCC is accepting comments on the proposed amendments until 30 days after publication in the Federal Register.