OCC Guidelines Establishing Standards for Recovery Planning by Certain Large Insured National Banks, Insured Federal Savings Associations, and Insured Federal Branches

DEPARTMENT OF THE TREASURY <SUBAGY>Office of the Comptroller of the Currency</SUBAGY> <CFR>12 CFR Part 30</CFR> <DEPDOC>[Docket ID OCC-2024-0008]</DEPDOC> <RIN>RIN 1557-AF27</RIN> <SUBJECT>OCC Guidelines Establishing Standards for Recovery Planning by Certain Large Insured National Banks, Insured Federal Savings Associations, and Insured Federal Branches</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Office of the Comptroller of the Currency, Treasury. <HD SOURCE="HED">ACTION:</HD> Notice of proposed rulemaking. <SUM> <HD SOURCE="HED">SUMMARY:</HD> The Office of the Comptroller of the Currency (OCC) is proposing to amend its enforceable recovery planning guidelines (Guidelines) to expand the Guidelines to apply to insured national banks, Federal savings associations, and Federal branches (banks) with average total consolidated assets of $100 billion or more; incorporate a testing standard; and clarify the role of non-financial (including operational and strategic) risk in recovery planning. </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> Comments must be received by August 2, 2024. </EFFDATE> <HD SOURCE="HED">ADDRESSES:</HD> Commenters are encouraged to submit comments through the Federal eRulemaking Portal. Please use the title “OCC Guidelines Establishing Standards for Recovery Planning by Certain Large Insured National Banks, Insured Federal Savings Associations, and Insured Federal Branches” to facilitate the organization and distribution of the comments. You may submit comments by any of the following methods: • <E T="03">Federal eRulemaking Portal—Regulations.gov:</E> Go to <E T="03">https://regulations.gov/.</E> Enter “Docket ID OCC-2024-0008” in the Search Box and click “Search.” Public comments can be submitted via the “Comment” box below the displayed document information or by clicking on the document title and then clicking the “Comment” box on the top-left side of the screen. For help with submitting effective comments, please click on “Commenter's Checklist.” For assistance with the <E T="03">Regulations.gov</E> site, please call 1-866-498-2945 (toll free) Monday-Friday, 8 a.m.-7 p.m. ET, or email <E T="03">regulationshelpdesk@gsa.gov.</E> • <E T="03">Mail:</E> Chief Counsel's Office, Attention: Comment Processing, Office of the Comptroller of the Currency, 400 7th Street SW, Suite 3E-218, Washington, DC 20219. • <E T="03">Hand Delivery/Courier:</E> 400 7th Street SW, Suite 3E-218, Washington, DC 20219. <E T="03">Instructions:</E> You must include “OCC” as the agency name and “Docket ID OCC-2024-0008” in your comment. In general, the OCC will enter all comments received into the docket and publish the comments on the <E T="03">Regulations.gov</E> website without change, including any business or personal information provided such as name and address information, email addresses, or phone numbers. Comments received, including attachments and other supporting materials, are part of the public record and subject to public disclosure. Do not include any information in your comment or supporting materials that you consider confidential or inappropriate for public disclosure. You may review comments and other related materials that pertain to this action by the following methods: • <E T="03">Viewing Comments Electronically—Regulations.gov:</E> Go to <E T="03">https://regulations.gov/.</E> Enter “Docket ID OCC-2024-0008” in the Search Box and click “Search.” Click on the “Dockets” tab and then the document's title. After clicking the document's title, click the “Browse All Comments” tab. Comments can be viewed and filtered by clicking on the “Sort By” drop-down on the right side of the screen or the “Refine Comments Results” options on the left side of the screen. Supporting materials can be viewed by clicking on the “Browse Documents” tab. Click on the “Sort By” drop-down on the right side of the screen or the “Refine Results” options on the left side of the screen checking the “Supporting & Related Material” checkbox. For assistance with the <E T="03">Regulations.gov</E> site, please call 1-866-498-2945 (toll free) Monday-Friday, 8 a.m.-7 p.m. ET, or email <E T="03">regulationshelpdesk@gsa.gov.</E> The docket may be viewed after the close of the comment period in the same manner as during the comment period. <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> Kimberly Jameson, Lead Expert, Market Risk, (202) 322-8527; Andra Shuster, Senior Counsel, Karen McSweeney, Special Counsel, or Priscilla Benner, Counsel, Chief Counsel's Office, (202) 649-5490; 400 7th Street SW, Washington, DC 20219. If you are deaf, hard of hearing, or have a speech disability, please dial 7-1-1 to access telecommunications relay services. </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> <HD SOURCE="HD1">I. Background</HD> Large-scale financial crises, including the 2008 crisis, have demonstrated the destabilizing effect that severe stress can have on financial entities, capital markets, the Federal banking system, and the U.S. and global economies. This is particularly true when a crisis places severe stress on large, complex financial institutions due to the systemic and contagion risks that they pose. During the 2008 crisis, the OCC observed that many financial institutions were not prepared to respond effectively to the financial effects of the severe stress. The lack of or inadequate planning threatened the viability of some financial institutions, and many were forced to take significant actions without the benefit of a well-developed plan for recovery. For the OCC, this experience further highlighted the importance of strong risk governance frameworks at large, complex banks, including plans for how to respond quickly and effectively to, and recover from, the financial effects of severe stress. The agency recognized that recovery planning would reduce a bank's risk of failure and increase the likelihood that the bank would return to a position of financial strength and viability following severe stress. It envisioned recovery planning—developing and maintaining a comprehensive recovery plan—as a dynamic and ongoing process that complemented a bank's other risk governance and planning functions and supported its safe and sound operation. The OCC expected recovery planning to enhance the focus of a bank's management and its board of directors (board) on risk governance, with a view toward lessening the negative effects of and recovering from future severe stress. On September 19, 2016, the OCC issued Guidelines Establishing Standards for Recovery Planning by Certain Large Insured National Banks, Insured Federal Savings Associations, and Insured Federal Branches of Foreign Banks (Guidelines). <SU>1</SU> <FTREF/> Under the Guidelines, a bank subject to the standards (a covered bank) should have a recovery plan that includes (1) quantitative or qualitative indicators of the risk or existence of severe stress that reflect its particular vulnerabilities; (2) a wide range of credible options that it could undertake in response to the stress to restore its financial strength and viability; and (3) an assessment and description of how these options would affect it. The Guidelines provided that a recovery plan should also address (1) the covered bank's overall organizational and legal entity structure; (2) procedures for escalating decision-making to senior management or the board; (3) management reports; (4) communication procedures; and (5) any other information the OCC communicates in writing. The Guidelines also set forth the responsibilities of management and the board with respect to the covered bank's recovery plan. <FTNT> <SU>1</SU>  81 FR 66791 (Sep. 29, 2016). The Guidelines are codified at 12 CFR part 30, appendix E. They were issued pursuant to section 39 of the Federal Deposit Insurance Act, 12 U.S.C. 1831p-1, which authorizes the OCC to prescribe enforceable safety and soundness standards. </FTNT> The 2016 Guidelines applied to banks with total consolidated assets of $50 billion or more. In 2018, the OCC amended the Guidelines to raise the threshold to $250 billion based on its view, at that time, that these larger, more complex, and potentially more interconnected banks presented greater systemic risk to the financial system and would benefit most from recovery planning. <SU>2</SU> <FTREF/> <FTNT> <SU>2</SU>  83 FR 66604 (Dec. 27, 2018). </FTNT> In March 2023, several insured depository institutions (IDIs) with total consolidated assets of $100 billion or more experienced significant withdrawals of uninsured deposits in response to underlying weaknesses in their financial position and failed. These institutions were not subject to recovery planning, which would likely have bolstered their resilience. For the OCC, these events highlighted the complexity and interconnectedness of some banks not covered by the Guidelines: banks with average total consolidated assets between $100 billion and $250 billion. The events, coupled with the OCC's supervisory experience, made clear the importance of ensuring that banks in this size range are adequately prepared and have developed a plan to respond to the financial effects of severe stress, particularly in light of the contagion effects and systemic risks they may pose. To address this issue, the OCC is proposing to expand the Guidelines to apply to banks with average total consolidated assets of $100 billion or more. In addition, during the OCC's almost 10 years of supervisory experience with the Guidelines, the agency has examined covered banks' recovery planning processes and reviewed numerous recovery plans. Based on this experience, the OCC has identified areas where the Guidelines should be strengthened and, as such, proposes to amend them by establishing a testing standard and increasing th ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 49k characters. 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