On May 25, the OCC announced revisions to its Policies and Procedures Manual (PPM) for bank enforcement actions. According to OCC Bulletin 2023-16, the recently revised version of PPM 5310-3 replaces and rescinds a version issued in November 2018 (covered by InfoBytes here), and now includes “Appendix C: Actions Against Banks With Persistent Weaknesses” to provide increased transparency and clarity on how the OCC determines whether a bank has persistent weaknesses and how the agency considers what actions may be needed to address these issues. The OCC explained that “persistent weaknesses” may include “composite or management component ratings that are 3 or worse, or three or more weak or insufficient quality of risk management assessments, for more than three years; failure by the bank to adopt, implement, and adhere to all the corrective actions required by a formal enforcement action in a timely manner; or multiple enforcement actions against the bank executed or outstanding during a three-year period.”
Possible actions taken against a bank that exhibits persistent weaknesses may include additional requirements and restrictions, such as requirements that a bank improve “composite or component ratings or quality of risk management assessments,” as well as restrictions on the bank’s growth, business activities, or payments of dividends. A bank may also be required “to take affirmative actions, including making or increasing investments targeted to aspects of its operations or acquiring or holding additional capital or liquidity.”
“Should a bank fail to correct its persistent weaknesses in response to prior enforcement actions or other measures . . . the OCC will consider further action to require the bank to remediate the weaknesses,” the agency said. “Such action could require the bank to simplify or reduce its operations, including that the bank reduce its asset size, divest subsidiaries or business lines, or exit from one or more markets of operation.” PPM 5310-3 also incorporates additional clarifications and updates legal and regulatory citations.
The same day, the OCC issued updates to its “Liquidity” booklet of the Comptroller’s Handbook used by examiners when assessing the quantity of a bank’s liquidity risk and the quality of its liquidity risk management. The booklet replaces an August 2021 version and reflects changes in regulations, makes clarifying edits, and addresses OCC issuances published since the last update.
