Coverage: September 2026 · Information to 1 September 2026
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TGB Monthly Regulatory Policy Brief · 1 September 2026
Between November 2025 and August 2026, supervisors in the US, the euro area, the UK and Australia set out changes to how they raise findings, close them and engage with banks, steering examiners towards material financial risk and away from process and documentation.
The desk view
On 27 August 2026 the OCC and the FDIC adopted a final rule that defines an "unsafe or unsound practice" and sets a common standard for matters requiring attention (MRAs), with the stated aim of putting material financial risk ahead of policies, process and documentation. The Federal Reserve has moved on a parallel track through supervisory operating principles released in November 2025 and updated in April 2026. In Europe, the ECB has lightened follow-up of low-severity findings and plans to review its stock of open measures, around 12,000 at the end of 2025, in an exercise due to start in October 2026. The PRA is lengthening its supervisory cycle, and APRA and ASIC have proposed cutting accountability notifications. Our reading is that the common thread is not lower standards but a narrower definition of what supervisors escalate; the test is whether material weaknesses are now found and fixed sooner.
The US writes a materiality test into regulation
The OCC–FDIC final rule, dated 27 August 2026, defines an unsafe or unsound practice for enforcement purposes and revises the framework for MRAs and other supervisory communications. The agencies say it is critical that examiners and institutions prioritise material financial risks over concerns related to policies, process, documentation and other nonfinancial risks. The agencies received 36 comments on the October 2025 proposal, and the rule takes effect 60 days after publication in the Federal Register.
Two thresholds now sit in regulation. An unsafe or unsound practice must be contrary to generally accepted standards of prudent operation and, if continued, be likely to materially harm the institution's financial condition or present a material risk of loss to the Deposit Insurance Fund, or must already have materially harmed its financial condition. For an MRA the practice must also breach prudent standards, but it is enough that material harm could reasonably be expected under current or reasonably foreseeable conditions, which the agencies describe as a lower bar than the likelihood test; an actual violation of a banking or banking-related law is also sufficient. Harm is defined in financial terms: losses or other negative impacts on capital, asset quality, earnings, liquidity or sensitivity to market risk.
Below the MRA line, a supervisory observation creates no requirement or expectation that it be presented to the board or that the bank take corrective action. Tailoring is mandatory: as the risk from a bank's capital structure, complexity, activities and size rises, the materiality threshold for an action or MRA falls.
The OCC expects fewer MRAs, fewer escalations to enforcement and annual cost savings for banks likely to exceed $100m. The OCC supervises 986 institutions, and all 2,700 FDIC-supervised institutions subject to examination as of 31 March 2026 could be affected.