FDIC Banking & Insurance Brief

Headline

OCC and FDIC finalize rule defining unsafe or unsound practice and revising MRA supervisory framework

Executive Summary

On September 1, 2026, the OCC and FDIC adopted a final rule that defines 'unsafe or unsound practice' under the Federal Deposit Insurance Act and revises the supervisory framework governing matters requiring attention. The rule restructures how both agencies issue and escalate formal supervisory communications across the supervised banking population.

Bottom Line

The rule places every OCC- and FDIC-supervised institution under a codified legal standard for what constitutes an unsafe or unsound practice, closing the prior regime of unconstrained examiner characterization. Institutions with open or anticipated MRAs now operate against a defined issuance and escalation framework, and remediation timelines set under the prior informal standards require reassessment against the new criteria. The dual-agency adoption means no segment of the federally supervised commercial banking population retains the prior discretionary environment.

Key Regulatory Signals

• Statutory Definition Now Codified: The final rule establishes a binding regulatory definition of 'unsafe or unsound practice' for the first time, replacing the prior case-by-case supervisory application. Every OCC- and FDIC-supervised institution now operates against a codified standard that examiners must apply uniformly when assessing practices and issuing findings.
• MRA Framework Revised Across Both Agencies: The rule revises the supervisory framework for matters requiring attention, the formal mechanism examiners use to compel corrective action at supervised institutions. Banks that currently hold open MRAs must assess whether their remediation plans and timelines remain adequate under the revised issuance and escalation standards.
• Escalation Pathway Restructured: The revised framework alters the conditions under which supervisory communications escalate from informal findings to formal enforcement referrals. Institutions with recurring or unresolved MRAs face a restructured escalation path that may compress the time between initial finding and formal action.
• Dual-Agency Scope Broadens Reach: Because both the OCC and FDIC are adopting identical standards, the rule applies across national banks, federal savings associations, and FDIC-supervised state nonmember banks. No major segment of the federally supervised commercial banking population sits outside the rule's scope.
• Examiner Discretion Constrained: Codifying the definition and revising the MRA issuance framework reduces examiner-level discretion in characterizing practices as unsafe or unsound. Institutions gain a defined standard against which to challenge findings, and examiners must document how a cited practice meets the codified criteria.

Regulatory Delta

- No prior federal banking regulation has codified a statutory definition of 'unsafe or unsound practice' under the Federal Deposit Insurance Act. This rule marks a structural departure from decades of application based on examiner discretion.

- The simultaneous revision of the MRA framework is new. Previously, the OCC and FDIC addressed MRA issuance through separate supervisory policy statements rather than a joint binding rule.

- The rule aligns with the broader post-2023 interagency effort to standardize supervisory communication practices. That effort followed Congressional scrutiny of examination consistency after the March 2023 bank failures.

Materiality Classification

HIGH — Final rule with a September 1, 2026 effective date codifying a binding statutory definition and restructuring the MRA supervisory framework across all OCC- and FDIC-supervised institutions; every supervised bank must assess open MRAs and examiner-facing practices against the new codified standard.

Intelligence Outlook

Monitor OCC and FDIC examination guidance and supervisory policy updates for implementing procedures, examiner training materials, and any interagency coordination with the Federal Reserve on application of this rule to state member banks.