The Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation have completed a joint rule that redefines what counts as an 'unsafe or unsound practice' in bank supervision. The term has served for decades as a catch-all basis for examiners to order banks to change behavior or face enforcement action.
American Banker described the finalized measure as producing narrower supervision procedures compared to prior practice. CryptoBriefing reported the same finalization, framing it as an effort to define the standard with more precision.
The 'unsafe or unsound' designation has historically given bank examiners wide latitude. Regulators could invoke it without detailed statutory criteria, relying instead on supervisory judgment. That flexibility let the OCC and FDIC respond quickly to emerging risks. It also drew criticism from banks and their customers who said the standard was applied inconsistently.
Financial technology firms and cryptocurrency-linked businesses have been among the most vocal critics of this supervisory approach. Many have said banks closed their accounts or refused service after examiners cited vague reputational or safety concerns. Those complaints fed into a broader debate over what critics have called informal debanking of legal but disfavored industries.
By narrowing the definition, the OCC and FDIC appear to be responding to years of pressure from lawmakers, banks, and affected businesses. A tighter, more objective standard could limit the discretion examiners have used to discourage banks from serving certain customers. It could also make supervisory decisions more predictable for banks weighing which clients to onboard.
The rule arrives amid a wider push in Washington to reassess how bank regulators oversee risk, particularly around digital assets. Congress and federal agencies have spent recent years debating how traditional banking rules should apply to crypto-related deposits, custody services, and stablecoin issuers. A clearer supervisory standard could factor into that broader effort to define acceptable banking relationships for the sector.
Market Impact
For banks, a narrower definition of unsafe or unsound practices could reduce uncertainty when deciding whether to serve fintech and crypto-adjacent clients. If examiners have less discretion to cite vague reputational concerns, some banks may become more willing to maintain or open accounts for digital asset firms.
The change does not eliminate bank supervision risk altogether, and firms should not assume access to banking services will change immediately. The practical effect will depend on how the OCC and FDIC apply the revised standard in future examinations and enforcement actions.
The finalized rule marks a shift in how two of the country's top bank regulators define risky conduct, with potential implications for how banks serve crypto and fintech clients going forward.
Frequently Asked Questions
What does 'unsafe or unsound practices' mean in bank supervision?
It is a longstanding regulatory term used by bank examiners to describe conduct that could threaten a bank's financial health or stability, historically applied with broad discretion.
Why did the OCC and FDIC narrow this definition?
The agencies have faced criticism that the previous, broader standard allowed examiners too much subjective judgment, contributing to inconsistent supervisory outcomes across banks.
How could this affect crypto companies seeking bank accounts?
A narrower standard may limit the grounds examiners use to discourage banks from serving crypto or fintech clients, though actual changes in bank behavior will depend on implementation.
Does this rule change apply to all banks?
The rule comes from the OCC and FDIC, which together oversee a large share of federally chartered and state-chartered banks, so its reach extends broadly across the banking system they supervise.