OCC And FDIC Finalize Standards For Unsafe Or Unsound Practices And MRAs

On August 27, the OCC and FDIC announced a final rule defining “unsafe or unsound practice” for purposes of Section 8 of the Federal Deposit Insurance Act and revising the agencies’ framework for Matters Requiring Attention (MRAs) and other supervisory communications. The final rule, which takes effect November 2, 2026, is intended to focus supervision and enforcement on material financial risks and compliance with banking and banking-related laws and regulations.

The final rule establishes new regulatory standards governing when the OCC and FDIC may identify unsafe or unsound practices and issue MRAs. Specifically, the final rule:

• Defines “unsafe or unsound practice.” A practice, act, or failure to act must be contrary to generally accepted standards of prudent operation and must have materially harmed, or if continued be likely to materially harm, the institution’s financial condition or present a material risk of loss to the Deposit Insurance Fund.
• Narrows the standard for MRAs. An MRA may address conduct contrary to prudent operating standards that could reasonably be expected to cause material financial harm or a material risk of loss to the Deposit Insurance Fund, as well as actual violations of banking or banking-related laws or regulations.
• Creates separate supervisory communications. Examiners may communicate less significant weaknesses through “supervisory observations,” which do not require corrective action or presentation to an institution’s board. The agencies may also require remediation of certain violations without issuing an MRA or taking enforcement action.
• Requires tailored, supported determinations. Supervisory and enforcement actions must be tailored based on factors including an institution’s capital structure, complexity, activities, and asset size. Examiners also must rely on objective facts and sound reasoning when identifying unsafe or unsound practices or issuing MRAs.

Putting It Into Practice: The final rule completes the OCC and FDIC’s October 2025 proposal (previously discussed here) and continues the agencies’ broader shift toward supervision focused on material financial risks. The rule may reduce the circumstances in which examination findings result in formal MRAs, while preserving supervisory authority over material financial risks and violations of banking-related law. OCC- and FDIC-supervised institutions should review examination-response and escalation procedures before the November 2 effective date and monitor how examiners apply the new materiality and tailoring standards in practice.