U.S. banking regulators are refocusing their supervisory approach, shifting examinations and enforcement actions toward material financial risks rather than minor procedural and documentation concerns. The updated Bank Supervisory Framework, led by the Office of the Comptroller of the Currency and supported by the Federal Deposit Insurance Corporation, raises the bar for issuing formal supervisory notices and draws a clearer line between substantive and technical regulatory violations.
The changes follow criticism of the supervisory response to Silicon Valley Bank’s collapse in 2023, which exposed concerns that examiners had not concentrated enough attention on the core financial risks threatening the institution’s safety and soundness.
Regulators Refocus Bank Supervision on Material Risks
Under the revised Bank Supervisory Framework, regulators are directing examiners to prioritise risks that could materially affect a bank’s financial health. Acting Comptroller of the Currency Jonathan V. Gould has argued that both examiners and financial institutions should concentrate on material financial risks and substantive violations rather than process-oriented concerns.
The framework introduces a revised definition of “unsafe or unsound practice,” tying it more closely to actions or omissions that pose a genuine threat to bank safety and soundness. This narrower definition is intended to ensure that enforcement tools are deployed where they matter most, rather than being spread across a wide range of minor issues.
The OCC has also announced plans to publish its policies and procedural manual, a move designed to bring greater transparency to the bank supervision process. For banking compliance teams and risk officers, this public access could provide clearer expectations about how examinations are conducted and what standards apply.
New Bank Supervisory Framework Raises Threshold for Formal Notices
One of the most notable elements of the updated Bank Supervisory Framework is the higher threshold for issuing Matters Requiring Attention, the formal notices that examiners use to flag concerns during bank examinations. Under the new approach, some minor or non-substantive issues may be handled outside the formal written-notice process, allowing regulators to reserve Matters Requiring Attention for findings that represent genuine risks to a bank’s operations or financial condition.
The distinction between substantive and technical violations sits at the heart of this shift. Technical breaches that do not threaten a bank’s soundness may receive less formal treatment, while substantive violations tied to material financial risks will continue to attract rigorous supervisory attention.
It is worth noting that larger or more complex financial institutions may still face a tougher supervisory response than smaller community lenders, reflecting the different risk profiles across the banking sector.
The American Bankers Association has welcomed the changes, viewing the updated bank supervision approach as a step toward more proportionate regulatory oversight. For banks, compliance teams and regulatory affairs professionals, the revised supervisory framework signals a clearer focus on the risks that genuinely matter to the stability and soundness of the financial system.