OCC and FDIC rewrite supervision framework for large US banks

A turning point in US banking supervision

The Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) — the two most important banking regulators in the United States — are overhauling their supervision processes for large banks. Instead of focusing on formal compliance (checklist-style), the new framework will focus on actual risks that banks pose to the financial system.

This is the biggest change in banking supervision policy since the Dodd-Frank Act of 2010. If approved, it will affect how major banks like JPMorgan Chase, Bank of America, and Citigroup operate and report risks.

From “check-box compliance” to “risk-based supervision”

Previously, the OCC and FDIC primarily checked whether banks were fully complying with existing regulations — a “check-box” approach. The new supervisory framework shifts to a risk-based supervision model, where regulators will assess the actual risk level each bank poses.

This means:

• Banks with more complex activities (derivatives, trading, crypto) will face stricter supervision
• Traditional banks (lending, deposits) will have simpler supervisory processes
• Regulators will have authority to intervene earlier when system risks are detected

Why the change now?

There are three main drivers for this change:

First, lessons from the collapse of Silicon Valley Bank (SVB) and Signature Bank in 2023 showed that the old supervisory framework couldn’t detect concentrated risks in time. SVB had a seemingly healthy balance sheet but actually had high risk concentration in a technology customer group.

Second, the development of fintech and crypto has created new types of risks that the old framework doesn’t cover. Large banks are increasingly participating in stablecoins, tokenized assets, and AI-driven trading — areas where current regulations haven’t kept up.

Third, political pressure from both parties. Republicans want to reduce regulatory burden on banks, while Democrats want stronger supervision after bank failures. Risk-based supervision is a middle-ground solution: reduce burden for low-risk banks, increase supervision for high-risk banks.

Impact on the global banking system

The OCC and FDIC changes don’t just affect US banks but have global ripple effects. International banks operating in the US (like HSBC, Deutsche Bank, Mizuho) must also comply with the new supervisory framework.

Moreover, other regulators often follow US standards. The Basel Committee on Banking Supervision (BCBS) may integrate risk-based supervision principles into the Basel IV framework, affecting banks in Europe, Japan, and other markets.

Implications for Vietnam and Japan

Vietnam: The State Bank of Vietnam (SBV) currently applies the Basel II framework and is in transition to Basel III. The OCC/FDIC changes could provide important lessons for SBV when building supervisory frameworks for large commercial banks like Vietcombank, BIDV, and VietinBank.

Especially as Vietnamese banks increasingly participate in digital banking, open APIs, and fintech products, transitioning from compliance-based to risk-based supervision will help SBV detect new risks earlier.

Japan: Japan’s Financial Services Agency (FSA) has a long tradition of risk-based supervision, but the OCC/FDIC framework could provide more specific tools for supervising major banks like MUFG, Sumitomo Mitsui, and Mizuho — particularly in the crypto and tokenized assets areas that Japanese banks are actively exploring.

Implementation challenges

Despite the right direction, implementing risk-based supervision faces many challenges:

Risk measurement: There’s no standard metric to measure “system risk.” Current risk models (VaR, stress testing) have proven limited during the 2008 and 2023 crises.

Resource constraints: Risk-based supervision requires personnel with deeper expertise than compliance-based. The OCC and FDIC are facing talent shortages, especially in crypto and AI fields.

Regulatory arbitrage: Banks may move risky activities to less-supervised entities (shadow banking), reducing the effectiveness of the new framework.

Conclusion

The OCC and FDIC changes mark an important shift from formal supervision to actual risk-based supervision. This is an inevitable trend as the financial system becomes increasingly complex with fintech, crypto, and AI participation.

For Vietnam and Japan, this is an opportunity to learn and adjust banking supervisory frameworks to match market realities. However, success depends on risk measurement capability, supervisory resources, and the ability to prevent regulatory arbitrage.

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Source: OCC and FDIC Set New Test for Unsafe Bank Practices — PYMNTS, August 28, 2026