The OCC has proposed a significant revamp and increase in its risk-management and governance standards for the institutions it regulates with assets over $50 billion, essentially seeking to separate national banks and federal savings associations from their parents to prevent risk transmission and ensure independent corporate governance. Significant new responsibilities for in-bank chief risk officers are detailed that correspond in some respects to those proposed by the FRB for large BHCs, but go beyond them in numerous areas.  Among these is a set of new responsibilities for a “chief audit executive,” whose roles and responsibilities would go well beyond those now ordinarily undertaken by the internal audit function at most banks.  The OCC is also proposing new standards for bank boards of directors, including a requirement that at least two directors be independent and that the risk tolerances they approve following a formulation process detailed in the guidance ensures insulation between the insured depository and the parent company regardless of the extent to which transfers may otherwise be authorized. Stress-testing standards would likely require add-on capital, liquidity, and earnings reserves regardless of current status as a well-capitalized, highly-liquid, or otherwise safe-and-sound bank or savings association.

The full report is available to retainer clients. To find out how you can sign up for the service, click here