OCC and FDIC finalize rule defining unsafe practices and tightening MRA standards
A joint final rule narrows what counts as an unsafe or unsound practice and imposes materiality and tailoring limits on examiner-issued MRAs, giving banks stronger grounds to challenge supervisory findings.
On August 27, 2026, the OCC and FDIC jointly finalized a rule that defines an unsafe or unsound practice as conduct contrary to prudent operation that has materially harmed, or is likely to materially harm, a bank's financial condition or pose a material risk of loss to the Deposit Insurance Fund. The rule also sets a binding framework for MRAs: examiners may issue one when an imprudent practice has caused or could reasonably be expected to cause material financial harm, but speculative concerns no longer suffice. MRAs based on legal violations must involve substantive, systemic, or patterned conduct, not mere technical infractions, and examiners must tailor findings to a bank's size, complexity, and risk profile, with a higher bar for treating harm as material at community banks. The OCC simultaneously revised its enforcement and MRA procedure manuals (PPM 5310-3 and PPM 5400-11) and issued a separate notice of proposed rulemaking distinguishing substantive from technical violations. The final rule excludes institution-affiliated parties, leaving individual enforcement under prior standards. Sophisticated bank counsel and compliance teams should monitor effective-date implementation and how examiners apply flexible concepts like materiality and prudent operation, while preparing to invoke the new standards when responding to MRA or enforcement actions.