OCC Addresses Banks with Persistent Weaknesses in Bank Enforcement Manual Revisions   

On May 25, 2023, the OCC announced the addition of “Appendix C: Actions Against Banks with Persistent Weaknesses” to the Policies and Procedures Manual (PPM) 5310-3, “Bank Enforcement Actions and Related Matters.”  Appendix C offers increased clarity and transparency on determining if a bank has a persistent weakness and the actions the OCC may take to correct the identified weakness. 

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.”  Enforcement actions to address persistent weaknesses may include additional requirements and restrictions.  Specifically, the OCC may require the bank’s board to oversee the development and implementation of an action plan to resolve persistent weaknesses; restrict the bank’s growth, business activities, or dividend payments; or require the bank to take additional action like acquiring or holding more capital or liquidity.

If a bank fails to correct persistent weaknesses, the OCC may take further action. For example, the OCC may require the bank to reduce its operations, divest business lines, or exit from one or more markets.  Michael J. Hsu, the Acting Comptroller of the Currency, said that the revised policy, which is focused on larger and more complex banks, promotes strong management by using fair consequences to address persistent weaknesses.