WASHINGTON — Only the nation’s very largest banks would be subject to enhanced risk-management requirements under a proposal issued last week by the Office of the Comptroller of the Currency, which said it is seeking to narrow the scope of rules designed to address threats to the financial system.
Under the proposal, so-called “heightened standards” would apply only to banks with $700 billion or more in assets, a sharp increase from the current $50 billion threshold. The OCC said the change is intended to reduce regulatory burden while focusing supervisory expectations on institutions whose size, complexity and risk profile pose the greatest potential risk to financial stability.
In a statement, the agency said it has developed substantial experience since the standards were first adopted in 2014, allowing it to better assess both the benefits and shortcomings of the rule. As a result, the OCC said it believes the requirements may be justified only for the largest and most complex banks.
Only for Largest & Most Complex
“Considering the extreme prescriptiveness of the Guidelines and their associated burden on covered banks, the OCC believes that the standards may only be justified for the largest and most complex institutions,” the agency said in the proposal.
The heightened standards, formally known as guidelines for corporate governance and risk management, require covered banks and federal savings associations to establish and follow a formal, written risk-governance framework. That framework must clearly define risk-management roles and responsibilities across front-line business units, independent risk management functions and internal audit operations, according to the OCC.
When the rules were adopted in 2014, the OCC applied them to banks with at least $50 billion in assets, citing lessons from the 2008 financial crisis. The agency said that crisis demonstrated how large, interconnected financial firms could destabilize the national economy, capital markets and the broader banking system.
‘Significant Experience’
In the years since, the OCC said, it has gained “significant experience” overseeing banks subject to the standards and evaluating how the requirements affect safety and soundness relative to compliance costs.
In addition to raising the asset threshold, the proposal seeks public comment on other potential revisions to the guidelines, though the agency did not detail those changes in its announcement.
The OCC said comments on the proposal will be due 60 days after publication in the Federal Register.
