On August 27, the Office of the Comptroller of the Currency (OCC) announced a series of significant actions designed to improve transparency, consistency, and clarity in bank supervision and enforcement. The actions — which include a joint final rule with the Federal Deposit Insurance Corporation (FDIC), two revised policies and procedures manuals (PPMs), and a proposed rulemaking — reflect the agencies’ stated commitment to refocusing supervisory attention on material financial risks over process, documentation, and other nonfinancial concerns. Notably, the Federal Reserve did not join in these actions, and as of the date of this post, has not issued any comparable guidance or commentary.

The Joint Final Rule: Defining “Unsafe or Unsound Practices”

At the center of yesterday’s actions is a final rule issued jointly by the OCC and FDIC that, for the first time, formally defines the term “unsafe or unsound practices” — a standard that has long been central to bank supervision but has never carried a statutory or regulatory definition. Under the new rule, unsafe or unsound practices are those that are contrary to generally accepted standards of prudent operation and that, if continued, could materially harm the institution or present a material risk of loss to the Deposit Insurance Fund. This definition marks a meaningful departure from the Federal Reserve’s current standard, which remains rooted in the concept of “abnormal probability of abnormal harm” as reflected in the Fed’s operating manual updated as recently as May 2026. Whether the Federal Reserve will move to align its definition with the OCC and FDIC’s materially-focused standard, or maintain its own distinct approach, remains an open question.

The rule also establishes uniform standards for when and how the agencies may issue Matters Requiring Attention (MRAs) as part of the examination process, and clarifies how supervisory observations and violations of laws and regulations will be communicated to institutions.

Revised Policies and Procedures Manuals (PPMs)

In connection with the final rule, the OCC substantially revised two PPMs:

• PPM 5310-3, “Bank Enforcement Action and Related Matters.” The revised manual emphasizes material financial risks and highlights the OCC’s three guiding principles when considering enforcement actions: escalation, tailoring, and focusing corrective actions on those essential to address specific deficiencies. The revisions also ensure that enforcement tools are used proportionately and predictably, including a recognition that the OCC may escalate to an enforcement action against a large or complex bank based on practices that would not trigger a similar response against a community bank.
• PPM 5400-11, “Matters Requiring Attention.” Notably, this PPM is being released publicly for the first time, providing banks and their counsel with greater visibility into the OCC’s supervisory standards. The revised manual reflects the framework established in the joint final rule and clarifies that MRAs will only be issued for practices, acts, or failures to act that meet the defined standard, and that MRAs must be tailored based on financial risk-related factors.

Proposed Rulemaking on Violations of Laws and Regulations

Alongside the final rule and revised PPMs, the OCC released a notice of proposed rulemaking (NPRM) that would codify its supervisory framework for issuing MRAs in response to violations of laws or regulations. The proposed rule would establish two defined categories of violations:

• Substantive violations — those with a meaningful impact on the institution or its customers, which would remain subject to the MRA process.
• Technical violations — less significant violations that would be addressed through a separate mechanism outside of an MRA.

The proposed distinction is intended to focus supervisory resources on violations that matter most, while providing a more proportionate path for addressing minor infractions. Comments on the proposed rule are due 30 days after publication in the Federal Register.

Our Take

Yesterday’s actions are part of a broader effort by the OCC to, in Comptroller Jonathan Gould’s words, “codify the agency’s return to risk-based supervision.” They follow a series of related steps, including the elimination of reputation risk from examinations, the targeting of regulatory relief for community institutions, the elimination of duplicative data collection requirements, and updated model risk management guidance emphasizing a risk-based, tailored approach.

For banks of all sizes (other than those supervised by the Federal Reserve), these actions represent a meaningful shift in how supervisory expectations are set and communicated more transparently by the OCC. The formal definition of unsafe or unsound practices, as finalized by the OCC and FDIC, brings long-sought clarity to a standard that has historically been applied inconsistently by the agencies. The public release of PPM 5400-11 gives institutions and their advisors direct insight into how examiners will evaluate and issue MRAs. And the proposed distinction between substantive and technical violations, if finalized, could meaningfully reduce the supervisory burden associated with minor regulatory infractions.