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FDIC board approves joint NPR to define ‘unsafe or unsound practices’ and narrow MRAs
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Summary
The FDIC board authorized publication of a joint FDIC‑OCC notice of proposed rulemaking to define “unsafe or unsound practices” for Section 8 enforcement and to clarify when examiners may issue matters requiring attention; the board authorized a 60‑day comment period.
The Federal Deposit Insurance Corporation board on Thursday voted to publish a joint notice of proposed rulemaking with the Office of the Comptroller of the Currency that would define “unsafe or unsound practice” for purposes of Section 8 of the Federal Deposit Insurance Act and revise when examiners may issue matters requiring attention (MRAs).
FDIC staff told the board the proposal would make explicit that an unsafe or unsound practice is an act, omission, or combination of practices that is contrary to generally accepted standards of prudent operation and that either is likely to materially harm an institution’s financial condition, present a material risk of loss to the deposit insurance fund, or has already materially harmed an institution. The agencies would tailor supervisory and enforcement actions under Section 8 and the issuance of MRAs based on institution size, capital structure and risk profile. Staff requested authorization to publish the notice with a 60‑day comment period.
“Today’s proposal would focus examiners’ attention on supervisory issues that are material to a bank’s safety and soundness,” the acting chairman said in a prepared statement, adding that the measure is intended to shift supervision away from process items and toward fundamental financial risks. He cited the failure of Silicon Valley Bank as an example of the risks of prioritizing process over core balance‑sheet vulnerabilities.
Acting Chairman statement: “The proposal would generally limit Section 8 enforcement actions and MRAs to practices and acts that have caused or could be expected to cause actual financial harm to the bank or materially impact the risk of the institution failing and imposing a cost on the deposit insurance fund.”
FDIC staff said the proposed MRA standard would set a lower threshold than the unsafe‑or‑unsound‑practice definition, allowing examiners to communicate issues that, if continued, could reasonably be expected under foreseeable conditions to materially harm an institution or present a material DIF risk.
The board moved, seconded and adopted the resolution authorizing publication of the notice. The board recorded the vote as adopted during the open meeting; Director Jonathan Gould explicitly voted “aye” during the roll call, and the acting chairman announced the motion adopted.
The agency invited public comment on a list of questions in the notice and said it will continue reviewing related supervisory manuals and rating frameworks, including the CAMELS framework.
