The Office of the Comptroller of the Currency (OCC) has revised its civil monetary penalty (CMP) policy, effective February 26, 2016. The revised Policy and Procedures Manual sets forth the OCC’s new scheme for the assessment of CMPs against national banks, federal savings associations, and bank service companies and service providers. The heart of the new policy is a revised “CMP Matrix” that increases the guideline fine amount a covered financial institution should be assessed for a violation of (i) banking laws or regulations, (ii) a condition imposed in writing or covered by a written agreement, (iii) an unsafe or unsound practice, or (iv) a breach of fiduciary duty.
The CMP Matrix provides guidance in determining the amount of a penalty assessment by evaluating the institution’s size and good faith, the gravity of a violation, and any history of previous violations, and it includes 13 specific relevant factors that must be considered. Of particular note are the changes to the Matrix for financial institutions with assets in the small to middle range of the industry. After the financial crisis, larger banks have been subject to increasingly large CMPs, but more recently small to mid-range financial institutions have come under greater scrutiny. While public enforcement actions brought by bank regulatory agencies against large financial institutions have been on the upswing over the past five years, more recently growing and mid-size financial institutions have also found themselves subject to intensified regulatory demands not infrequently resulting in public enforcement actions and hefty fines.
The OCC has long utilized such matrices, but the revised versions contain more explicit grading criteria and feature heightened weight scores. The new manual also includes a schedule of penalties based upon the CMP Matrix score and seven other categories that are divided by asset size of the subject institution. An exemplar of the CMP Matrix for institutions is included below.
The CMP Matrix does not reduce the CMP process to a mathematical equation, as any assessed penalty should consider all matters as justice may require. Institutions will continue to have an opportunity to respond to any contemplated penalty, pursuant to a 15-day letter. As always, it will behoove a financial institution to carefully document its policies and procedures, explain its actions, and prepare to advocate for a fair and equitable result that achieves a regulatory agency’s supervisory objectives, including an exploration of whether an alternative supervisory response, other than a CMP, may be most appropriate.