OCC UPDATED GUIDANCE - VIOLATIONS OF LAWS AND REGULATIONS (NATIONAL BANKS AND FEDERAL SAVINGS ASSOCIATIONS)


I.          INTRODUCTION

The Office of the Comptroller of the Currency (OCC) has updated its policies and procedures regarding violations of laws and regulations.  The OCC’s updated guidance highlights the principles important in implementing the agency’s mission of ensuring safe and sound bank operations. The goals and practices the agency is implementing, are as follows:

  • Ensure consistency of the purpose, processes, and procedures within and across all OCC lines of business, including community, midsize, and large banks; federal branches and agencies; and banks overseen by the OCC’s Special Supervision group.
  • Communicate violations using a consistent format:
  • legal citation and description;
  • summary of relevant statutory or regulatory requirements;
  • facts supporting the violation and root cause(s);
  • corrective action(s) required; and
  • board and management’s commitment(s) to corrective action.
  • Reinforce the importance of timely and thorough follow-up and tracking of bank management’s corrective actions and milestones to those actions.
  • Convey the relationship of violations to matters requiring attention, CAMELS/ITCC or ROCA ratings, and the bank’s risk appetite and profile.
  • Emphasize the need for examiners to communicate effectively and in a timely manner with the bank’s board of directors, the bank’s management team, and OCC supervisors.


II.        COMMUNICATION WITH BOARD AND MANAGEMENT

Examiners must communicate all OCC-identified violations to facilitate timely and effective corrective action by the board and management. Examiners must communicate substantive violations to the bank in a report of examination (ROE) or supervisory letter, including substantive self-identified violations in certain circumstances. Examiners must communicate less substantive OCC-identified violations in a separate written document if the examiners do not include them in an ROE or supervisory letter. Examiners may use discretion to determine whether less substantive, self-identified violations warrant communication in a separate written document.

The OCC expects the board and management to take timely and effective correction of all violations regardless of how they are communicated. If management fails to correct a violation previously communicated in a separate written document by the OCC, the examiner should include the violation in the next ROE or supervisory letter.

The first time an examiner communicates a violation to a bank, the examiner must label the violation with one or more of the following attributes:

  • New: Label violations as “new” when the OCC has not previously communicated the same or substantially similar violations in writing during the previous five-year period.
  • Self-identified: Label violations as “self-identified” when there is evidence that the board or management is aware of the violation and documented and disclosed the violation to the OCC before or during the examination. A self-identified violation can arise from various sources, including customer complaints, risk and control self-assessments, independent risk management, internal audit reviews, or third-party reviews.
  • Repeat: Label the violation as “repeat” when the OCC communicated the violation (even if self-identified) in writing during the previous five-year period and new violations of the same or substantially similar regulation or law occur subsequent to the board or management receiving notification. Repeat violations may be substantive or an indication that management failed to remediate the deficient practices that led to the violation, management lacks the commitment or ability to ensure prompt correction and prevention of the violations, or the board has not exercised appropriate oversight or held management accountable for remediation of the causative deficient practices.

Upon completing a follow-up activity, examiners must determine whether to label a violation as past due, pending validation, or closed.

  • Past due: During verification, examiners determine the bank has not implemented the expected corrective actions for the violation within the required time frame, or, during validation, examiners determine that the corrective action is not effective or sustainable. Once a violation is deemed past due, it continues to be past due until it is closed.
  • Pending validation: The OCC verified that the bank implemented the corrective actions, but insufficient time has passed for the bank to demonstrate sustained performance under the corrective actions, and the OCC has not validated the sustainability of the corrective actions, or the OCC determines that additional testing is warranted.
  • Closed: The bank has corrected the violation, and the OCC has verified and validated the bank’s corrective actions; a change in the bank’s circumstances corrected the violation; or the violation is otherwise deemed uncorrectable. Closed violations should be communicated as closed in the subsequent ROE, supervisory letter, or written list of violations.

Compliance Handbook Search

STAY CONNECTED

Nebraska Bankers Association

233 South 13th Street, Suite 700
Lincoln, NE 68508
​402-474-1555
​Digital Millennium Copyright Act Policy