OCC Proposes Raising Asset Threshold for Heightened Standards Guidelines
Commentary by Tim Byrne
The Office of the Comptroller of the Currency ("OCC") proposed amending its "Heightened Standards" guidelines for large insured national banks and federal savings associations.
In the proposed rulemaking, the OCC explained that the Heightened Standards guidelines "establish minimum standards for the design and implementation" of a risk governance framework and for a board of directors' oversight. The proposal would increase the average total consolidated assets threshold for "covered banks" subject to these guidelines from $50 billion to $700 billion. The OCC noted that the guidelines, originally issued to strengthen governance at large institutions, should be tailored to better reflect the risk profiles of the entities it supervises. The OCC would retain authority to apply the guidelines to certain banks below the $700 billion threshold, including where a bank’s operations are highly complex or its parent controls another covered bank.
The OCC provided the following reasons for its proposal: (i) the current $50 billion threshold captures institutions that do not present the same systemic risks as the largest global banks; (ii) raising the threshold would reduce unnecessary regulatory burden for mid-sized and regional banks while preserving the agency's ability to address unsafe or unsound practices through other supervisory means; (iii) the amendment allows the OCC to refocus the guidelines on institutions whose size, complexity, and risk profile pose the greatest risk to the banking system; and (iv) the adjustment promotes consistency by aligning the applicability of these standards with other recent regulatory frameworks defined by asset size.
The OCC also requested feedback on the proposed transition periods and other technical revisions to the guidelines.
Comments on the proposal must be submitted on or before March 2, 2026.
Commentary
The OCC noted that it expects that smaller banks not subject to heightened standards will maintain robust risk governance frameworks, risk management systems, and processes that are tailored to their individual size, complexity, and risk profile. In addition, the OCC asks for comment on a number of matters, including whether any parts of the heightened standards (such as those relating to strategic plans, risk appetite statements, talent management processes, compensation and performance management programs and additional standards as banks increase in size) should continue to apply to smaller institutions. Interestingly, the OCC also asks for comment on whether it should simply rescind the guidelines, which is what it is proposing to do with its recovery planning guidelines.
The OCC also noted that this rulemaking is consistent with other recent rulemakings regarding the bank supervisory process that will allow examiners to "shift their supervisory efforts away from examining operational processes and refocus on material financial risks…"