Aims to ensure large banks adequately prepared and have a plan for severe stress.
Proposal clarified role of non-financial risk in recovery planning, expanded guidelines to apply to banks with at least $100bn in assets, and incorporated a testing standard.
Follows OCC Hsu remarks on recovery plans in wake of 2023 bank crisis, #213780.
Covered Bank Threshold
Expand recovery planning guidelines to apply to banks with at least $100bn in assets.
Current guidelines generally apply to banks with average assets of $250bn or more.
Amended average total consolidated assets to refer to average of total consolidated assets of bank or covered bank; calculation based on total assets line of call report.
Testing Standard
Proposed rulemaking incorporated a testing standard for covered bank recovery plans.
Covered bank should test its overall recovery plan and each element of the plan.
To ensure that the bank will be an effective tool during periods of severe stress.
Covered bank may simulate severe financial and non-financial stress scenarios.
Such as the scenarios used to develop the plan, to confirm that the plan is likely to work as intended when the covered bank is experiencing periods of severe stress.
Must ensure the plan's triggers reflect the covered bank’s particular vulnerabilities and will provide the bank with timely notice of a continuum of increasingly severe stress.
Ranging from warnings of likely occurrence of stress to the actual existence of stress.
Testing should also enable management and the board to verify that the bank has identified credible options and is adequately prepared to carry out these options.
Although proposal does not include a specific testing format or methodology, testing should be risk-based and reflect covered bank’s size, risk profile, activities, complexity.
Non-Financial Risk
Clarified role on non-financial risk (operational and strategic risk) in recovery planning.
Made conforming changes to highlight importance of financial and non-financial risks.
Consultation
Comments from public are due in 30 days from pending publication in federal register.
Jul. 3, 2024 Fed Reg Proposal
On Jul. 3, 2024, OCC published proposal in the federal register, comments by Aug. 2.
Jul. 3, 2024 OCC Bulletin on Proposal
On Jul. 3, 2024, OCC issuedBulletin 2024-16 publishing press release on proposal.
In Aug. 2024, BPI issued letter re OCC proposed recovery plan changes, see #221887.
Oct. 21, 2024 OCC Final Recovery Planning Guidelines
On Oct. 21, 2024, OCC published finalized revisions to its recovery planning guidelines.
In response to comments, provided covered banks with timeframes in which to comply with guidelines, including development of a testing framework and conducting testing.
Amended testing guideline to be appropriate for bank’s individual size, risk profile, activities, and complexity, including complexity of organizational legal entity structure.
Revised guideline to state that testing should validate the effectiveness of the recovery plan, including by considering each element of the plan, to address any confusion.
Covered banks will have 12 months to amend their recovery plans to address non-financial risk and an additional 6 months to comply with the new testing provision.
Banks, financial institutions becoming covered banks will have 12 months to develop their recovery plan and an additional 12 months to comply with the testing provision.
Revisions to the recovery planning guidelines become effective on Jan. 1, 2025
Oct. 22, 2024 Fed Reg OCC Final Guide
On Oct. 22, 2024, OCC published final recovery planning guidelines in federal register.
