Feds Redefine Bank 'Unsafe' Acts: Smarter Supervision or More Rules?
Published Date: 9/1/2026
Rule
Summary
The OCC and FDIC are rolling out a new rule starting November 2, 2026, that clearly defines what counts as 'unsafe or unsound practices' for banks and savings institutions. This update helps banks focus on big financial risks instead of small paperwork issues, making supervision smarter and fairer. Banks will need to adjust how they handle these risks, which could affect their operations and how they communicate with regulators.
Analyzed Economic Effects
4 provisions identified: 3 benefits, 1 costs, 0 mixed.
Narrowed Definition of Unsafe Practices
The agencies adopted a regulatory definition that an "unsafe or unsound practice" means a practice, act, or failure to act that (1) is contrary to generally accepted standards of prudent operation and (2) if continued, is likely to materially harm an institution's financial condition or present a material risk of loss to the Deposit Insurance Fund (DIF), or has materially harmed the institution. The rule adopts the probability standard "likely" and applies prospectively to the agencies' supervisory activities and enforcement actions under 12 U.S.C. 1818, effective November 2, 2026.
New MRA Issuance Standards and Tailoring
The agencies clarified when they may issue Matters Requiring Attention (MRAs): an MRA may be issued only for practices, acts, or failures to act that (a) are contrary to generally accepted standards of prudent operation and (b) if continued, could under current or reasonably foreseeable conditions be likely to materially harm the institution or present a material risk to the DIF, or have already materially harmed the institution, or (c) are actual violations of law or regulation. The agencies will tailor supervisory expectations and the use of MRAs based on capital structure, riskiness, complexity, activities, asset size, and other financial risk-related factors, and may use supervisory observations for issues that do not meet the MRA standard; these rules take effect November 2, 2026.
Exclusion of Institution-Affiliated Parties
The final rule does not apply to institution-affiliated parties. The agencies stated that enforcement actions against institution-affiliated parties will continue to be handled under the agencies' prior standards and controlling appellate case law, rather than under this new regulatory definition, effective November 2, 2026.
Clear Harm Standard and Examiner Burden
The agencies clarified that "harm to financial condition" means financial losses or other negative impacts to an institution's capital, asset quality, earnings, liquidity, or sensitivity to market risk. The agencies also require that examiner determinations about unsafe or unsound practices and MRAs be based on objective facts and sound reasoning. These clarifications are effective November 2, 2026.
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Key Dates
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