On June 7, the Office of the Comptroller of the Currency (OCC) issued guidance summarizing its expectations for national banks and savings associations (collectively, banks) regarding capital adequacy and capital planning. This guidance , set forth in OCC Bulletin 2012-16, also discusses the OCC’s processes for evaluating a bank’s capital planning and adequacy, and the various actions the OCC may take to ensure a bank’s capital planning process and capital level remain adequate for its complexity and overall risks. This bulletin also rescinds Office of Thrift Supervision CEO Memorandum 380, “Capital Management,” dated March 15, 2011.

The major take-away from the guidance suggests that banks and savings banks may no longer be able to rely on mere compliance with capital ratios in order to maintain a designation as well-capitalized. Instead, examination teams will assess capital ratios and also assess the bank’s capital planning process itself. "A robust capital planning process is an integral and significant part of a bank’s governance process necessary to ensure safe and sound operations and ongoing viability. The exact content, extent, and depth of the capital planning process should be commensurate with the overall risks, complexity, and corporate structure of the bank…. The supervisory review process assesses whether (1) the bank has a sound and effective process commensurate with its overall risk and complexity to determine that its overall capital is adequate and (2) the bank maintains a capital level that is commensurate with its risks and is consistent with the bank’s internal assessment and identified capital needs on an ongoing basis and as underlying conditions change (for example, changes in a bank’s overall risks or economic conditions)."

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