OCC, FDIC Tighten Definition of Unsafe Bank Practices, Limiting Leeway to Pressure Crypto Firms

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The Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. clarified the standards they use to define "unsafe or unsound practices" in bank supervision. By tying scrutiny more closely to actual legal violations and material financial risks, the change could also ease regulatory uncertainty for banks serving lawful clients such as crypto firms.

On Aug. 27, the OCC and FDIC issued a final rule establishing a uniform definition of "unsafe or unsound practices" and common supervisory standards for banks. The rule will take effect 60 days after it is published in the Federal Register.

The core of the rule requires supervisory objections to be linked to material financial risk or compliance issues involving banking laws and regulations. It also directs examiners to prioritize substantive financial risks over nonfinancial matters such as policies, procedures and documentation.