The Office of the Comptroller of the Currency (OCC) and Federal Deposit Insurance Corporation (FDIC) on August 27, 2026, finalized a rule that establishes new standards for determining when a bank has engaged in an “unsafe or unsound practice” and when examiners may issue a Matter Requiring Attention (MRA) (for the FDIC, MRAs will now replace the former MRBAs, Matters Requiring Board Attention). The rule is intended to refocus supervision on material financial risks and away from less consequential concerns involving policies, procedures, documentation, reputation risk and other nonfinancial matters.

The rule is significant because the term “unsafe or unsound practice” has long been used by the agencies without a regulatory definition. Section 8 of the Federal Deposit Insurance Act, 12 U.S.C. § 1818, authorizes various enforcement actions based on such practices, but the statute itself does not define the term.

A new standard for unsafe or unsound practices

Under the final rule, an unsafe or unsound practice must be contrary to generally accepted standards of prudent operation and either be likely, if continued, to materially harm the institution’s financial condition or present a material risk of loss to the Deposit Insurance Fund (DIF) or have already materially harmed the institution.

The rule defines “harm to financial condition” to include financial losses or other negative impacts on capital, asset quality, earnings, liquidity, or sensitivity to market risk.

The agencies declined to establish numerical thresholds for “likely” or “material.” Instead, examiners must support their determinations with objective facts and sound reasoning.

A separate standard for MRAs

The final rule establishes a somewhat lower threshold for an MRA. An MRA may be issued when a practice is contrary to generally accepted standards of prudent operation and could reasonably be expected, under current or reasonably foreseeable conditions, to materially harm the institution or present a material risk to the DIF. An MRA also may be based on an actual violation of a banking or banking-related law or regulation.

The agencies emphasize, however, that not every technical violation should result in an MRA. The final rule also creates an “other violations” category under which an agency may require a bank to remediate an actual violation without issuing an MRA or taking an enforcement action.

Supervisory observations are different

The rule expressly distinguishes MRAs from supervisory observations. An observation may identify weaknesses in a bank’s policies, practices, condition, or operations that do not rise to the level of an MRA. Unlike an MRA, a supervisory observation does not create a requirement that the bank take corrective action or that the matter be presented to the board.

This distinction should reduce the risk that informal examiner suggestions will effectively become mandatory requirements through repeated examinations.

Supervision will be tailored

The OCC and FDIC also will tailor their treatment of unsafe or unsound practices and MRAs to the institution’s capital structure, complexity, activities, asset size, and other financial risk factors. As the risks associated with an institution increase, the agencies may apply a lower materiality threshold and impose more extensive remediation requirements.

A potentially important change in examination culture

The rule represents an effort by the agencies to make bank supervision more focused, predictable, and risk-based. Its practical importance, however, will depend on how examiners apply concepts such as “generally accepted standards of prudent operation,” “likely,” “reasonably expected,” and “material,” all of which remain subject to judgment.

For banks, the most important change may be that an examiner will have to connect a supervisory finding to objective facts and a material financial risk, rather than simply identifying a policy or procedural deficiency. Whether that produces a meaningful change in examination practices remains to be seen.

What about existing MRAs — and the Federal Reserve?

The FDIC addresses existing MRAs in Financial Institution Letter 53-2026 issued in conjunction with the final rule. “The FDIC is ending the use of Matters Requiring Board Attention (MRBAs) and Supervisory Recommendations (SRs) for examination findings. Outstanding MRBAs and SRs will be reviewed and will either be redesignated as MRAs where appropriate or otherwise closed out.” The OCC has not yet stated its position about outstanding MRAs.

The Federal Reserve is not a party to the OCC/FDIC rule because it has its own statutory supervisory authority and supervisory framework. Nevertheless, the Fed is pursuing a similar approach. It began reviewing all outstanding safety-and-soundness MRAs and MRIAs in February 2026 and has said that matters inconsistent with its revised supervisory framework will be closed or downgraded to supervisory observations. 

Thus, although the Federal Reserve did not join the OCC and FDIC rulemaking, the three federal banking agencies appear to be moving toward a common supervisory philosophy: examination resources should be concentrated on material threats to safety and soundness rather than procedural or documentation deficiencies.