OCC Adopts Amended Recovery Planning Requirements
Commentary by Tim Byrne
The OCC adopted rule changes to current recovery planning guidelines. The amendments (i) lower the "covered bank threshold," (ii) include a testing requirement and (iii) require the consideration of non-financial risk.
As previously covered, the OCC amendments:
- expanded the subject entities to include "insured national banks, federal savings associations, and federal [bank] branches" that have at least $100 billion in "average total consolidated assets." The current threshold is $250 billion;
- required an assessment of non-financial risk, including "an understanding of, and a plan for mitigating, the non-financial challenges and risks, including operational challenges and risks, associated with executing each recovery option during severe stress;" and
- incorporated a testing requirement in recovery plans, which would include not only testing the overall recovery plan, but also each element of the plan.
The effective date was set for January 1, 2025, though there are extended compliance dates for certain provisions.
Commentary
The OCC adopted the guidelines largely as they were proposed in July, including lowering the threshold for application of the guidelines from $250 to $100 billion. It appears that such lowering of the threshold will newly subject approximately 10 institutions to the guidelines, with two or three more approaching the threshold.
The OCC did grant additional time to comply with certain aspects of the guidelines, including the new testing requirement. The OCC also noted that as a condition of approving a merger, the OCC can require that a bank comply with the guidelines on a timeline other than the one generally specified in paragraph I.B. of the guidelines.
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