ABA Calls for Rescission of OCC Heightened Risk Governance Standards

The American Bankers Association ("ABA") urged the Office of the Comptroller of the Currency ("OCC") to fully rescind its heightened risk governance guidelines for insured national banks.

In a comment letter on proposed amendments to "increase the average total consolidated assets threshold for applying the Guidelines from $50 billion to $700 billion," the ABA agreed that the OCC's Guidelines, as currently formulated, are overly prescriptive in dictating how banking organizations design and implement their risk governance frameworks. The ABA acknowledged that the OCC’s proposal would significantly narrow the scope of the Guidelines, ultimately leaving only a handful of institutions subject to them. The ABA asserted that continuing to impose rigid, enforceable standards on any insured national bank would unnecessarily constrain those institutions’ ability to tailor and innovate more effective and efficient risk management practices. The ABA argued that the OCC should completely rescind the guidelines rather than just limiting their scope.

Further, the ABA asserted that the current framework forces banks to prioritize compliance with prescriptive policies, processes, and documentation requirements over addressing actual financial risk exposures. The ABA emphasized that the largest covered institutions are already subject to extensive regulatory oversight. The Association noted that the parent holding companies of the remaining covered banks are subject to the Federal Reserve’s Regulation YY ("Enhanced Prudential Standards") risk management and risk committee requirements, which impose enhanced prudential standards. As a result, the ABA argued that even if the OCC rescinds the guidelines, these institutions will continue to "maintain robust risk governance frameworks" and operate in a safe and sound manner.

The ABA maintained that enforcement actions should be tied to concrete violations of banking laws rather than technical breaches of process-driven guidelines. Should the OCC determine that some form of the guidelines remain, the ABA urged the agency to replace them with nonbinding, principles-based supervisory guidance and to seek public comment on any such guidance before it is finalized.