Canada: The U.S. Follows Canada’s Lead: Financial Regulatory Framework – OCC Finalizes Guidelines For Large Banks Regarding Heightened Standards For Risk Management And Governance

On September 2, 2014, the U.S. Department of Treasury, Office of the Comptroller of the Currency ("OCC") released final Guidelines (the "Guidelines") aimed at strengthening the governance and risk management practices of large national banks, insured Federal savings associations, and insured Federal branches of foreign banks operating in the U.S. ("Banks"). The Guidelines represent another response to the recent financial crisis and the corresponding legislative and regulatory developments focused on stability in the financial system. The approach adopted by the OCC shares many similarities with policies that have been recently adopted by Canadian regulators aimed at strengthening responsible internal risk management by Canadian financial institutions.

The Guidelines

The Guidelines seek to further the goals outlined by the Dodd-Frank Act, namely to strengthen the financial system by focusing management and boards of directors on enhancing risk management and governance practices. The Guidelines also reflect the international policies coming out of the Financial Stability Board and Basel Committee on Banking Supervision which have been or are being adopted by domestic regulators around the world.

The Guidelines formalize five "heightened expectations" that the OCC has developed in the aftermath of the financial crisis. The objective of the Guidelines is to enhance the OCC's supervision of and strengthen the risk management and governance practices of the Banks. The expectations are:

  1. Preserving the sanctity of the charter, by ensuring that the bank operates in a safe and sound manner rather than simply as an extension of its parent bank holding company.
  2. Maintaining a well-defined personnel management program that places emphasis on talent development, recruitment, succession planning and provides for a compensation structure that discourages inappropriate risk taking.
  3. Defining and communicating an acceptable risk appetite throughout the organization.
  4. Maintaining reliable oversight programs, including the development of strong audit and risk management functions.
  5. Having a board of directors willing to provide a credible challenge to senior management's decision-making.

Requirements under the Guidelines

The Guidelines require the creation and implementation of and compliance with a formal, written risk governance framework (the "Framework") that manages and controls various kinds of risk encountered by the Banks. The Framework should be designed by independent risk management within the Bank and should include well-defined risk management roles and responsibilities. The Guidelines also require a Strategic Plan, including ongoing assessments of the Bank's risk profile and related strategic objectives, and a Risk Appetite Statement. The Guidelines also articulate key standards for boards of directors in overseeing management and ensuring the implementation of safe and sound banking practices.

A similar framework addressing the types of risk and level of risk that a financial institution is willing to accept in order to achieve its business objectives (as well an outline of the roles and responsibilities of those overseeing this framework) is required by Canadian regulators.


A key aspect of the Guidelines is the provision for enforcement pursuant to Section 39 of the Federal Deposit Insurance Act ("FDIA"). The OCC may initiate the enforcement process when it determines that a Bank has failed to meet a standard prescribed by the Guidelines. The OCC has the discretion to require the submission of a compliance plan specifying the steps the institution will take to correct the inadequacies and the timeline for its implementation. The OCC may issue an enforceable order if the financial institution fails to submit an acceptable compliance plan or fails in any material way to implement an approved plan.

Similarities with the Canadian approach

We are seeing many of the same themes emerging here in Canada. In recent comments before the Economic Club of Canada, Jeremy Rudin, the Superintendent of Financial Institutions, noted that financial regulators in Canada are focused on curbing "excessive" risk taking by financial institutions. He also noted that this objective has been pursued by encouraging boards of directors and management at financial institutions to take responsibility for managing their institutions' risk. This approach differs from the enforcement approach reflected in the Guidelines in that the Canadian regulators provide "guidance" to the financial institutions and monitor compliance through supervisory powers and not through an enforcement mechanism.

Mr. Rudin  further commented on the benefits of the approach taken by financial regulators in Canada:

A major strength of our approach is that it aims to ensure that regulatory compliance does not become a substitute for risk management. Indeed, financial institutions cannot comply with our expectations unless they actively measure and manage their own risks.

For example, the Corporate Governance Guidelines issued by the Office of the Superintendent of Financial Institutions (OSFI) in January 2013 emphasize:

  1. The role of an effective, independent and competent board of directors overseeing management.
  2. Effectively overseeing the management of risk through the development of internal risk management systems, practices and controls, positions such as a Chief Risk Officer, and committees such as a Risk Management Committee and the Audit Committee.
  3. Developing a Risk Appetite Framework, which meets the minimum standards set out in the guidelines, to guide risk taking activities.


The interest and focus on risk management and risk governance will only continue as the legislative and regulatory framework continues to unfold in the wake of the financial crisis. Effective risk management starts within the financial institutions itself. It is essential that financial institutions continue to begin the analysis by turning inward to focus on the internal culture and controls unique to each institution.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions