OCC Updates Examination Policies Regarding Violations of Laws and Regulations

May 23, 2017, the Office of the Comptroller of the Currency (OCC) issued Bulletin 2017-18: Violations of Laws and Regulations.  The updated policy and procedures are effective on July 1, 2017 and apply to examinations of all national banks, federal savings associations, and federal branches and agencies. With these changes, the OCC aims to increase the effectiveness of its process for handling violations of laws and regulations. This update builds upon the OCC’s earlier development of controls to better manage the process for handling “Matters Requiring Attention” in 2014.

Changes are reflected in the “Bank Supervision Process,” “Community Bank Supervision,” “Federal Branches and Agencies,” and “Large Bank Supervision” booklets and other sections of the Comptroller’s Handbook and internal guidance.

The updated policies and procedures provide the OCC with guidelines on consistent terminology, communication, format, follow-up, analysis, documentation, and reporting of violations. Summarized are the goals and practices the OCC is implementing:

  • 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
    • Corrective action required
    • Board and management’s commitment 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.

The bulletin contains the following specific instructions related to examiner communications to bank management:

  • When communicating a violation, the examiner must label the violation as: New, Self-identified, or Repeat.
  • Examiners must then label violations upon completing follow-up activity as: Past due, Pending validation, or Closed. A violation may be simultaneously labeled as both “Past due” and “Pending validation” in certain circumstances.

With these updated policies and procedures, the OCC emphasizes the importance of timely and effective communication of violations to an institution’s ability to address and correct violations before such violations affect the institution’s condition.

  • 781-402-6406

Marissa Blundell, JD, principal, services as CLA Bankers Advisory’s chief operating officer, overseeing all quality control and compliance assessment services. She is a graduate of Skidmore College and New England School of Law. She is admitted to the Massachusetts Bar. Marissa provides compliance training to clients, conducts public training webinars, and speaks at state and regional industry events. She is co-chair of the Massachusetts Mortgage Bankers Association Legislative Committee and is a member of the Mortgage Action Alliance Steering Committee and the national Mortgage Bankers Association's Quality Assurance Committee.

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