Banking Regulations Compliance | Guidance on Communicating Violations

If you’re an OCC Bank, they recently issued Guidance on their updated policies and procedures for communicating violations of laws and regulations.  It indicates that “substantive” violations are to be communicated in a Report of Examination (ROE) or Supervisory letter.  This may include self-identified violations that require more research and those violations for which the corrective action hasn’t been completed (including remediation) or verified.  Other violations should be communicated in a separate written document, subject to examiner discretion.  If not corrected, these violations are to subsequently appear in an ROE or Supervisory letter.

When violations are first identified, each one is to be labeled “New”; “Self-Identified”; or “Repeat”.  A violation will be labeled “New” or “Repeat” based on whether it’s been cited in writing during the previous 5 years.

After the proper follow-up, violations are considered “Past Due”; “Pending Validation”; or “Closed”.

• Past due means corrective action has not been implemented, is not effective, or cannot be maintained.
• Pending Validation means corrective action has been implemented, but there hasn’t been enough time to be able to demonstrate that the action can be maintained. The OCC has not validated the corrective action taken or feels additional testing is necessary.  Violations may be past due and pending validation at the same time, if there hasn’t been enough time for a bank to demonstrate or the OCC to validate ongoing compliance.
• Closed means corrective action has been implemented, verified and validated by the OCC; the violation is no longer an issue; or the violation can’t be fixed. Closed violations should be communicated through the ROE, a supervisory letter, or other written list of violations.

These changes were effective July 1^st and affect a number of the Comptroller Handbooks, including those for Community and Large Bank Supervision.

Published
2017/07/12
Diane Dean