On October 7, 2025, FDIC and Office of the Comptroller of Currency (OCC) approved a joint notice of proposed rulemaking that introduces the first formal definition of “unsafe and unsound practices” under §8 of the Federal Deposit Insurance Act. The proposal revises the framework for supervisory communications, including the issuance of matters requiring attention (MRAs).
In the proposal, an “unsafe and unsound practice” would be defined as “any act, omission, or pattern of behavior that deviates from generally accepted standards of prudent operation and either has caused, or is likely to cause, material harm to an institution’s financial condition or poses a material risk to the Deposit Insurance Fund (DIF)”. Further, the proposal reserve MRAs for practices that, if continued under current or foreseeable conditions, could materially harm an institution’s financial condition, present a material risk to the DIF, or violate banking laws or regulations.
While the threshold for the issuance of MRAs would be significantly higher than it is currently, the proposal would leave the threshold lower than that of “unsafe and unsound practices” to allow time of earlier supervisory intervention. The agencies’ supervisory and enforcement actions would be tailored to each institution’s capital structure, complexity, risk profile, asset size, and any financial risk related factor that the agencies deem appropriate.
The proposal provides that the agencies may still communicate suggestions or observations to institutions orally or in writing, but such communications should be distinguished from MRAs. Importantly, the agencies note that a downgrade in an institution's composite supervisory rating to “less than satisfactory” would generally only occur in circumstances in which the institution receives an MRA or an enforcement action.
These changes underscore a shift in agency focus from procedural critiques to those of substantive financial risk; however, several questions remain:
- What constitutes a deviation from generally accepted standards of prudent operation and who determines those standards?
- How will “pattern of behavior” be defined and what timeframe and data granularity are required to demonstrate a pattern or likelihood?
- How will material harm be defined?
- How much actual relief is there with written supervisory communications as compared to an MRAs?
The public comments period extends for 60 days following publication in the Federal Register.
How Forvis Mazars Can Help
In the heavily regulated banking industry, leaders face more challenges than ever, from striving to meet shareholder and regulatory expectations to pursuing digital innovation. Forvis Mazars can help your financial institution tackle issues inherent to the industry, including market growth, internal control threats, industry consolidation, and compliance. We have the skills and experience in financial services that you can trust, combining a focus on Unmatched Client Experience® with the resources of a global firm. Serving you is our passion and privilege.
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