On October 1st, the Office of the Comptroller of the Currency (OCC) published the Fiscal Year 2020 Bank Supervision Operating Plan (“FY 2020 Plan”).

The FY 2020 Plan sets forth the OCC’s supervision priorities and objectives for the fiscal year beginning October 1, 2019 and ending September 30, 2020. The supervision priorities set forth align with the the OCC’s Strategic Plan, Fiscal Years 2019-2023.

The FY 2020 Plan facilitates the development of supervisory strategies for individual national banks, federal savings associations, federal branches, federal agencies, and technology services providers. OCC staff members use the plan to guide their supervisory priorities, planning, and resource allocations.

The FY 2020 Plan calls for the development of supervisory strategies that focus on a number of key areas including:

Bank Secrecy Act/Anti-Money Laundering (BSA/AML) Compliance

The FY 2020 Plan emphasizes the institution’s implementation of Customer Due Diligence requirements including beneficial ownership information. We have blogged repeatedly on the BSA regulations regarding beneficial ownership, effective on May 11, 2018 (including here, and more generally regarding the issue of beneficial ownership, including here). The FY 2020 Plan also emphasizes evaluating whether an institution’s BSA/AML risk management systems match the complexity of the business models and products offered, evaluation of technology solutions used to perform or enhance BSA/AML oversight functions, and assessment of the adequacy of suspicious activity monitoring and reporting systems and processes.

Cybersecurity Operational Resiliency

The FY 2020 Plan emphasizes evaluating the institution’s threat vulnerability and detection, assess controls and data management, and management of third-party connections. The FY 2020 Plan calls for examiners to focus on an institution’s information technology risk management evaluation and its information technology systems maintenance.

Commercial and Retail Credit Underwriting  

The FY 2020 Plan focuses on evaluating the institution’s credit risk appetites, risk layering, and portfolio risk exposure. Supervisors will also examine the institution’s commercial and retail credit oversight and control functions, including portfolio administration and risk management, independent loan review, concentration risk management, policy exception tracking, collateral valuation, stress testing, and collection management.

Impact of Changing Interest Rate Outlooks

The FY 2020 Plan also focuses on the impact of changing interest rate outlooks on the institution’s activities and risk exposure, including deposit costs, funding migration, asset valuations, borrower debt service capacity, and housing affordability.

Preparedness for the Current Expected Credit Losses (CECL) Standard

The FY 2020 Plan focuses on the institution’s preparedness for the Current Expected Credit Losses (CECL) standard including evaluating implementation plans and use of third-party vendors to assist in methodology, modeling, and management information systems developed.

Preparedness for the Potential Phase-out of the London Interbank Offering Rate (LIBOR)

The FY 2020 Plan also focuses on the institution’s preparedness for the potential phase-out of LIBOR as a reference rate after 2021, including impact assessments, correlated risk assessments, vendor management, and change management related to the implementation of an alternative index for pricing loans, deposits, other products and services, as well operations and compliance risks.

Technological Innovation and Implementation

Finally, the FY 2020 Plan focuses on the institution’s technological innovation and implementation, including the use of cloud computing, artificial intelligence, digitalization in risk management processes, new products and services, and strategic plans. Further, the FY 2020 Plan allocates resources and support for risk-focused examinations of technology and significant service providers that provide critical processing and services to institutions.

While these priorities will guide supervision of all institutions examined, the FY 2020 Plan recognizes that departments will take into account bank size, complexity, and risk profile when developing individual bank supervisory strategies.

The FY 2020 Plan also calls on supervisory units within the OCC to coordinate resources and conduct agency-wide horizontal risk assessments during the year.

The OCC will provide periodic updates regarding supervisory priorities, emerging risks, and risk assessments in its Semiannual Risk Perspective reports.

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