The change affects institutions supervised by the two agencies. On the OCC side, that includes national banks, federal savings associations and federal branches and agencies. The rule does not automatically establish the same standard for every bank overseen by another federal regulator.

What the rule changes

The joint rule defines an unsafe or unsound practice as an act, failure to act or combination of practices that is contrary to generally accepted standards of prudent operation and is likely, if continued, to materially harm a bank’s financial condition or create a material risk of loss to the Deposit Insurance Fund. It also covers conduct that has already materially harmed a bank’s financial condition.

The agencies said the framework is intended to provide greater clarity and certainty while directing supervisory attention toward material financial risks and compliance with banking and banking-related laws and regulations.

The OCC describes financial harm in terms of effects on areas such as capital, asset quality, earnings, liquidity or sensitivity to market risk. A reputational risk unrelated to a bank’s financial condition does not, by itself, fit the rule’s definition.

How formal MRAs will work

Under the new standard, an MRA may be issued for a practice, act or failure to act that is contrary to generally accepted standards of prudent operation and could reasonably be expected, under current or reasonably foreseeable conditions, to materially harm the bank or present a material risk to the Deposit Insurance Fund. An MRA may also follow harm that has already occurred or an actual violation of a banking or banking-related law or regulation.

The OCC said the standard narrows the scope of practices that support an MRA while still allowing examiners to identify risks before losses occur. Examiners must share the objective facts and sound reasoning supporting an unsafe-practice finding or MRA.

The rule requires supervisory and enforcement activity to be tailored to factors including a bank’s capital structure, complexity, activities, asset size and other financial-risk considerations. As the risks associated with those factors increase, the agencies say the materiality threshold may decrease, the assessment of harm may become more granular and remediation expectations may increase.

What may fall outside a formal MRA

The agencies said examiners may still communicate informal “supervisory observations” about weaknesses that do not meet the MRA threshold. Those observations can identify potential improvements, but unlike an MRA they do not create a requirement or supervisory expectation that the issue be presented to the bank’s board.

The framework also recognizes “other violations.” These are violations for which the agencies do not take an enforcement action or issue an MRA. The agencies may still require a bank to remediate the violation and take other steps required by law, but they will not direct additional action unless the law requires it.

The agencies said the rule prioritizes material financial risks over policies, process, documentation and other nonfinancial concerns when those concerns do not meet the formal standard. That does not mean process or documentation problems are permitted or can never lead to enforcement. Their treatment will depend on whether they contribute to a material risk, combine with other weaknesses, violate applicable law or produce material consequences.

Why customers may care

Customers should not expect an immediate change to deposit insurance, account terms, fees or lending rules from this action alone. The main change is supervisory: what examiners formally elevate, how they label it and how banks are expected to correct it.

Because formal MRAs can drive board-level attention and remediation, the rule could affect how banks prioritize operational, compliance and customer-service weaknesses. The practical effect will depend on examination decisions and implementation, including whether primarily procedural issues are treated as informal observations, other violations or part of a broader material risk.

Related OCC proposal and next steps

Alongside the final rule, the OCC released revised policies and procedures manuals for enforcement actions and MRAs. It also released its MRA manual publicly for the first time, saying the step would improve transparency and consistency in its supervisory standards.

The OCC separately proposed a framework distinguishing “substantive” from “technical” violations of laws and regulations. The proposal is intended to focus supervisory attention on violations with the greatest impact on an institution or its customers and would provide a way to address violations that are not substantive outside an MRA. Comments are due 30 days after publication in the Federal Register.

Reuters reported that the Federal Reserve had not issued a parallel proposal defining unsafe or unsound practices as of August 27, 2026. The next developments to watch are implementation of the OCC-FDIC rule, any Federal Reserve action and the OCC’s public-comment process on the separate violations proposal.

Sources

• OCC-FDIC joint release on the final rule
• OCC Bulletin 2026-40
• Reuters report on the regulators’ action