On September 1, 2026, the Federal Deposit Insurance Corporation (FDIC) and Office of the Comptroller of the Currency (OCC) jointly issued a final rule related to supervisory actions that continues their effort to focus examiners’ and banks’ attention on material financial risks and compliance with banking and banking-related laws and regulations. The final rule becomes effective November 2, 2026.
The final rule is part of a broader effort by the regulators to increase transparency and accountability in the supervisory process. For several years, banks and trade groups have raised concerns regarding inconsistent examination findings, the expanding use of Matters Requiring Attention (MRA) as part of the exam process, and supervisory expectations that were not always tied to material financial risk or clear legal violations. The new rule responds to those concerns by establishing uniform standards governing supervisory criticism.
Key Takeaway
Under the newly issued Rule, the FDIC and OCC have adopted binding standards that limit when examiners may characterize conduct as an unsafe or unsound practice and when they may issue an MRA as part of an exam. The rule is intended to focus supervisory criticism on material financial risk and actual legal violations, potentially reducing supervisory burden associated with technical or low-risk findings. Banks should evaluate how these changes affect examination management, escalation procedures, and board reporting practices.
Uniform Definition of “Unsafe or Unsound Practice”
The final rule establishes the following uniform definition for the term “unsafe or unsound practice” under 12 CFR § 4.92(b) and 12 CFR § 305.1(b):
“a practice, act, or failure to act, alone or together with one or more other practices, acts, or failures to act, that:
(1) Is contrary to generally accepted standards of prudent operation; and
(2) (i) If continued, is likely to—
(A) Materially harm the financial condition of the institution; or
(B) Present a material risk of loss to the Deposit Insurance Fund; or
(ii) Materially harmed the financial condition of the institution.”
This uniform definition is expected to promote greater clarity and certainty regarding enforcement and supervision standards and ensure that examiners prioritize concerns related to material financial risks.
Uniform Standards for Matters Requiring Attention
The final rule also establishes uniform standards for when and how the agencies may, as part of the examination process, issue MRAs and communicate supervisory observations and other violations of laws and regulations under 12 CFR § 4.92(c) and 12 CFR § 305.1(c):
“The [agency] may only issue a matter requiring attention to an institution for a practice, act, or failure to act, alone or together with one or more other practices, acts, or failures to act, that:
(1) (i) Is contrary to generally accepted standards of prudent operation; and
(ii) (A) If continued, could reasonably be expected to, under current or reasonably foreseeable conditions:
(1) Materially harm the financial condition of the institution [, which refers to financial losses or other negative impacts to an institution’s capital, asset quality, earnings, liquidity, or sensitivity to market risk]; or
(2) Present a material risk of loss to the Deposit Insurance Fund; or
(B) Materially harmed the financial condition of the institution; or
(2) Is an actual violation of a banking or banking-related law or regulation.”
Importantly, the agencies clarify that they will tailor their use of the unsafe or unsound practices definition and the MRA standard based on the risks associated with the bank’s capital structure, complexity of the bank, bank activities, asset size of the bank, and any other financial risk-related factor deemed appropriate. The final rule further clarifies that supervisory observations concerning weaknesses in a bank’s policies, practices, condition, or operations do not trigger board-reporting or corrective-action requirements. However, the agencies may require remediation of an actual violation of a banking or banking-related law or regulation.
OCC Proposed Rulemaking on Violations
Separately, on September 1, 2026, the OCC issued a notice of proposed rulemaking to revise the supervisory framework for the issuance of MRAs in response to violations of laws or regulations and for addressing violations for which the OCC does not take an enforcement action or issue an MRA. The proposed rule would amend 12 C.F.R. Part 4 to add new sections 4.92(d), (i), and (j) to: (1) clearly define substantive violations of law or regulation; (2) clarify how the OCC will treat technical violations; and (3) clarify that noncompliance with appendices in 12 CFR Part 30 is not a substantive violation. Comments are due on or before October 1, 2026.
The OCC’s proposal may prove equally significant as the final rule. By distinguishing substantive violations from technical violations, the OCC appears to be signaling that supervisory resources should be focused on violations that create meaningful risk or consumer harm rather than isolated procedural deficiencies. Banks should pay close attention to the proposal’s treatment of technical violations because it could materially affect examination findings and remediation obligations.
Practical Implications for Banks
These regulatory changes represent a meaningful shift toward a more risk-focused and proportionate supervisory approach. For banks, this means:
- Greater Predictability in Examinations: The uniform definitions provide clearer standards for when examiners may cite unsafe or unsound practices or issue MRAs. Banks should experience more consistent and predictable examination outcomes, with enforcement actions focused on practices that pose genuine material risks rather than technical or immaterial concerns.
- Reduced Burden from Low-Risk Findings: The distinction between formal MRAs and supervisory observations means that not every identified weakness will require board-level attention or formal corrective action plans. This should reduce the compliance burden associated with addressing minor or immaterial issues.
- Tailored Supervision: The agencies’ commitment to tailoring the application of these standards based on a bank’s capital structure, complexity, activities, and asset size suggests that smaller community banks may benefit from a more proportionate supervisory approach.
How Banks Should Respond
Banks should take the following actions:
- Review outstanding MRAs and determine whether they would satisfy the new regulatory standard and if not, be ready to reach out to the supervisory agencies about getting them resolved.
- Reassess current MRA and supervisory finding response processes and board reporting protocols to distinguish between MRAs and supervisory observations.
- Evaluate examination and issue management procedures.
- Train management and compliance personnel on the revised standards before the November 2, 2026, effective date.
- For OCC supervised banks, consider submitting comments on the OCC proposal by October 1, 2026, particularly if the proposal could affect your bank’s compliance framework.
Supervisory Outlook
The final rule is one of the most significant recent attempts to constrain supervisory discretion by tying formal supervisory criticism to material financial risk and actual legal violations. If implemented as intended, banks may see greater consistency, transparency, and predictability in the examination process while preserving regulators’ ability to address significant safety and soundness concerns.
Although the final rule establishes clearer standards, banks should not expect a reduction in supervisory scrutiny of material risk-management weaknesses. The agencies expressly retain discretion to apply the standards based on institution-specific factors, including complexity, capital structure, activities, and risk profile. As a result, similarly situated findings may still be treated differently depending on the bank’s unique circumstances.
If you have questions about these regulatory developments or how they may impact your bank, please contact your Winthrop & Weinstine attorney.