What the Agencies’ Supervisory Changes Mean for Bank Directors

In October 2025, the federal regulators announced a significant shift in their respective approaches to bank supervision. The Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. issued a joint proposed rule that will establish a regulatory definition for the term “unsafe or unsound practice” and formalize standards for issuing matters requiring attention (MRAs). 

While it didn’t join that proposal, the Federal Reserve issued an internal statement of operating principles to guide its examiners. These initiatives direct examination staff to focus on the material financial risks facing their supervised institutions and to de-prioritize concerns related to policies, process and documentation. Director oversight priorities should reflect this shift, and directors should ensure they understand the material financial risks and primary factors that could impact them, and that management reports detail those risks and factors.  

While the agencies’ shift will likely reduce the number of MRAs, recommendations and criticisms focused on policy weaknesses, procedure omissions and documentation gaps, directors should avoid letting their strong governance and risk management frameworks and controls wilt. A future administration may revert to the agencies’ previous trend towards increasing expectations around policy development and record maintenance. A sudden pivot in an institution’s compliance-focused tone at the top and its embedded compliance culture could draw scrutiny from exam teams in three years. 

For state-chartered banks, many state regulatory counterparts may not be onboard with the federal agencies’ shift in approach. Therefore, it is important that boards continue to support the maintenance of existing controls, processes and culture, even if they recognize that exposure to federal supervisory measures in these areas will be reduced under this administration.

The federal agencies’ recent initiatives include several examiner directives that should prove durable. For example, the Fed’s policy statement instructs staff to communicate MRAs with “sufficient specificity so that a person of ordinary intelligence can readily know what the deficiency is underlying” the finding. The statement also encourages “meaningful dialogue” between examiners and bankers and instructs its employees to invite feedback on whether individual MRAs are justified, what the supervisory expectations are and how the issues can be remediated. 

Bank boards should seize this opening. If directors are not clear on what the problems are or the expected solutions, they should request additional meetings to routine exit meetings to ensure the parties are on the same page when an exam wraps up. Directors and management taking advantage of this more open-door approach should be able to avoid misunderstandings about the scope, breadth or depth of remedial measures, or worse yet, doubts regarding leadership’s capacity or willingness to address identified weaknesses.

Boards should proactively make requests to close or lift MRAs once all corrective actions have been implemented. The OCC and FDIC’s proposal signals that the agencies are planning changes to MRA verification and validation procedures to ensure MRAs are lifted as soon as required measures have been completed. The agencies’ acknowledged that leaving MRAs open for long periods after the actions have been implemented, to measure sustainability, can distract directors and management by inflating the volume of outstanding findings. 

The Fed’s statement is even more direct, asserting that MRA termination should not be delayed for more supervisory testing. Instead, the MRAs should be closed, with accountability for management only if and when a deficiency reappears later. Boards should drive management efforts to quickly initiate and then fully satisfy outstanding corrective actions so that the requests to get out from under the actions can be granted more expeditiously.

Finally, the agencies’ initiatives show a willingness to rely on the results of effective internal and independent audits to eliminate potentially repetitive examination requests and reviews. This should spur bank boards to enhance the quality and expertise of their internal and outsourced audit functions. The Fed’s statement permits banks to avoid “duplicative” agency validations of audit conclusions that MRAs have been remediated, unless the audit function has been rated unsatisfactory. A separate November 2025 OCC proposal suggests that an effective independent audit could substitute for the agency’s own review, at least for community banks, under certain conditions. Investing in the capabilities and quality of audit functions could therefore go a long way in eliminating the resource and attention drain brought on by regulatory examinations.

The agencies’ recent announcements present banks with an opportunity to more quickly and efficiently address and remove regulatory findings and reduce examination burdens. Bank boards that retain their effective governance and risk management frameworks and controls, and that take advantage of the agencies’ increased openness and receptiveness for active dialogue, should succeed in taking advantage of the new regulatory environment.