On December 17, 2015, the Office of the Comptroller of the Currency (“OCC”) issued proposed guidelines for each large ($50 billion or more in total consolidated assets) banking institution under its jurisdiction requiring the bank to develop and maintain a recovery plan to address situations of severe stress that might occur at the particular institution while it still is an ongoing concern. A “recovery plan” is defined as “a plan that identifies triggers and options for responding to a wide range of severe internal and external stress scenarios and to restore a covered bank that is in recovery to financial and operational strength and viability in a timely manner.” Comments are due on or before February 16, 2016.
The “recovery plan” is different than the “resolution plans” required under the Dodd-Frank regulatory reform act that address the situation of the institution in a nonviable state. Unlike resolution plans, the banking institutions do not need to submit their recovery plans to the OCC on a regular basis; they will be reviewed as part of an OCC examination of the particular banking institution.
The proposed guidelines would be applicable to large insured national banks and federal savings associations, and insured branches of non-US banks licensed by the OCC (jointly referred to as “covered banks”). The general requirement is that a covered bank develop and maintain a recovery plan that is tailored to its individual risk profile, size, activities, and integrated into its overall risk management and corporate governance functions. The recovery plan should be approved by the bank’s board of directors and reviewed on an annual basis and re-approved when changes are made.
The proposed guidelines set out the components of the recovery plan, including the following:
- A description of the covered bank’s organizational structure, operations and interconnections within the bank, its affiliates and subsidiaries, and “critical” third parties
- Identification of qualitative or quantitative indicators of the risk or existence of severe stress that should always be escalated to management for action (“triggers”), such as fraud, reputational crisis, or impairment of critical infrastructure that could severely affect the bank’s ability to operate
- Identification of viable options to sufficiently address the breach of any of these triggers and maintain the bank’s ability to continue operating, and how each option would affect the bank
- A description of the process to be followed in escalating decision-making to senior management or the board of directors in response to the occurrence to the breach of a trigger
- A description of the procedure to be followed to notify the OCC, others within the bank and appropriate external parties when there has been a “significant” breach of a trigger