US banking regulators have finalised new rules narrowing supervision and enforcement towards material financial risks, the Office of the Comptroller of the Currency (OCC) and Federal Deposit Insurance Corporation (FDIC) said on 27 August, in a move intended to give banks clearer standards and reduce attention on minor compliance issues.

The final rule establishes a uniform definition of an “unsafe or unsound practice” for enforcement and supervisory activity. It also sets standards for issuing Matters Requiring Attention (MRAs), formal notices used by regulators to require banks to address deficiencies.

The OCC and FDIC said the changes are designed to ensure examiners prioritise risks that could materially affect an institution’s financial position, liquidity and safety over policies, processes, documentation and other non-financial concerns. The rule applies only to institutions supervised by the two agencies.

The overhaul follows criticism of bank supervision after the failure of Silicon Valley Bank in March 2023. Reuters reported that the bank’s Federal Reserve supervisors had issued several notices concerning governance, controls and anti-money laundering risks, while interest rate and liquidity exposures ultimately played a major role in its collapse.

A regulator involved in the joint action told Reuters that the notices issued to Silicon Valley Bank “should have been about the actual risks to the bank rather than a random assortment”. The regulator said the new approach could mean banks no longer receive formal notices for minor issues such as breaches of regulatory IT guidance.

The agencies will distinguish between “substantive” and “technical” violations, with non-substantive breaches addressed outside the formal written notice system. Jonathan V Gould, comptroller of the currency, said examiners and banks should prioritise “material financial risks and substantive violations of law” over concerns relating to policies, processes and documentation.

The rule forms part of a wider effort under the Trump administration to change US banking supervision, including the removal of “reputational risk” from supervisory frameworks. The OCC and FDIC have said previous approaches could turn examinations into “check-the-box” compliance exercises rather than assessments of risks capable of threatening banks.

The OCC will publish its policies and procedural manual for the first time as part of the changes, which it said would improve transparency and accountability. The agency will use a more demanding supervisory approach for large or complex banks, while enforcement responses will be tailored to institution-specific risk factors.

The American Bankers Association welcomed the changes, with president and chief executive Rob Nichols saying they would “bolster the safety and soundness of banks of all sizes” while providing greater consistency and predictability.

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