The Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation issued a joint final rule on Thursday defining “unsafe or unsound practice,” the phrase that has underpinned federal bank enforcement since 1966. The rule also rewrites the standard for issuing Matters Requiring Attention, the supervisory findings a bank must carry to its board.
A practice, act, or failure to act now qualifies as unsafe or unsound only if it is “contrary to generally accepted standards of prudent operation” and, if continued, is likely to materially harm the bank’s financial condition or present a material risk of loss to the Deposit Insurance Fund, according to the rule. The agencies wrote into the rule text what harm to financial condition covers: capital, asset quality, earnings, liquidity, and sensitivity to market risk. Reputational risk unconnected to financial condition is excluded. MRAs carry a lower probability threshold and can also rest on an actual violation of a banking or banking-related law. The rule takes effect 60 days after Federal Register publication.
For the crypto industry, the rule represents a significant milestone toward preventing debanking in the wake of the so-called Operation Choke Point 2.0, the industry’s shorthand for the supervisory pressure that cut crypto companies off from bank accounts, because a supervisor has to tie a criticism to a legal violation or a material financial risk rather than a procedural or reputational concern.
The OCC and FDIC received 36 comments on the October 2025 proposal and made two substantive changes. Institution-affiliated parties, meaning individual bankers, were dropped from the rule’s scope, so enforcement against individuals continues under prior standards. The agencies also added a category of “other violations” they can require a bank to remediate without issuing an MRA. The OCC expects to issue fewer MRAs and estimates direct cost savings across its 986 supervised institutions exceeding $100 million. ABA President and CEO Rob Nichols said the actions “will bolster the safety and soundness of banks of all sizes.”
Thursday’s rule caps a rollback that started early in the administration. The OCC stopped examining banks for reputational risk in March 2025, and Trump’s Fair Banking for All Americans order directed regulators to strip the term from supervisory handbooks that August. Alongside the final rule, the OCC published revised MRA policy manuals and a separate proposed rulemaking on MRAs that will go out for comment.
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The post OCC and FDIC Finalize Rule Defining ‘Unsafe or Unsound Practice,’ Cutting Reputational Risk Out of Bank Supervision appeared first on Unchained.
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