OCC Proposes Higher Threshold for Applying Heightened Standards
On December 23, 2025, the Office of the Comptroller of the Currency (“OCC”) issued a Proposal to increase the threshold for applying its specialized standards for safety and soundness at larger banks (“Heightened Standards”).1
The Proposal would increase the average total consolidated assets threshold for applying the Heightened Standards from $50 billion to $700 billion. This would have the effect of decreasing the number of organizations subject to the Heightened Standards from 31 to five.
The OCC will accept comments on the Proposal until March 2, 2026. In this Legal Update, we provide background on the Heightened Standards and discuss the Proposal.
Background
In response to the 2008 financial crisis, the OCC established heightened expectations for the governance and oversight of the larger banks that it regulates.2 In 2014, it adopted those expectations as the Heightened Standards and prescribed them as applying to banks (i) with average total consolidated assets equal to or greater than $50 billion; (ii) that are controlled by a parent company that controls another bank that is subject to the Heightened Standards; or (iii) that the OCC determines are highly complex or otherwise present a heightened risk.3
The core of the Heightened Standards are requirements that (i) a larger bank design and implement a risk governance framework, and (ii) the institution’s board of directors oversee that framework.4 The required framework must cover the risk stripes defined by the OCC and must be composed of several highly detailed parts. Other mandatory parts of the Heightened Standards include the development of a written strategic plan with at least a three-year horizon, implementation of risk limits, risk data aggregation and reporting, and establishment of talent management processes and compensation and performance management programs. The Heightened Standards also require a larger bank to manage concentrations of risk, including through limits (e.g., caps on aggregate exposure).
Tailoring Proposal
Based on its experience with the Heightened Standards, the OCC believes that their benefits and burdens may support applying them to only the largest and most complex banks. The size, complexity, and risk profile of these banks arguably poses the greatest risk to financial stability and the banking system, and therefore, justifies compliance with the “extreme prescriptiveness” of the Heightened Standards.
The Proposal would define the universe of the largest and most complex banks by increasing the average total consolidated assets threshold for applying the Heightened Standards from $50 billion to $700 billion. However, the OCC would retain the authority to apply the Heightened Standards to banks with less than $700 billion in average total consolidated assets if the OCC determines that a bank’s operations are highly complex or otherwise present heightened risk that would make application of the Heightened Standards appropriate.
The Proposal also requests comment on other changes to the Heightened Standards. These include whether banks that are well capitalized and well managed should be excluded from complying with the Heightened Standards, and whether the OCC should change the 95% of parent company assets threshold for permitting a bank to rely on a parent company’s risk governance framework.
Other questions in the Proposal address the substance of the Heightened Standards, including:
- Whether to clarify the roles and responsibilities established for front line units, independent risk management, and internal audit by providing banks with greater flexibility in designating the roles and responsibilities that should be performed by each organizational unit.
- Whether to remove or adjust any roles and responsibilities for front line units, independent risk management, or internal audit.
- Whether to revise the definitions of “front line unit,” “independent risk management,” and “internal audit,” such as by explicitly excluding an organizational unit that provides legal services to the bank from the term “front line unit” or excluding other specified organizational units from that term.
- Whether to refocus the Heightened Standards solely on a bank’s policies, instead of on the bank’s policies, procedures, and processes.
- Whether to eliminate the compensation and performance management provisions of the Heightened Standards as duplicative of other requirements.
- Whether to change the composition, due diligence, risk management, and reporting and requirements for a bank’s board of directors.
Takeaways
The Proposal is part of the broader regulatory reform agenda of the banking agencies to re-establish a risk-based tailoring approach to bank supervision. We expect to see additional actions later this year by the banking regulators to further tailor regulation, including by the Federal Reserve Board to update the enhanced prudential regulatory requirements adopted under Section 165 of the Dodd-Frank Act.
1 OCC, Bull. 2025-51 (Dec. 23, 2025); 90 Fed. Reg. 61,084 (Dec. 30, 2025). The OCC regulates national banks, federal savings associations and federally licensed branches of non-US banks. For ease of reading, this Legal Update refers to all OCC-regulated entities that are insured by the Federal Deposit Insurance Corporation as “banks.”
2 See Remarks by Thomas Curry, Comptroller of the Currency (Dec. 7, 2012).
