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OCC Bulletin 2021-54
November 23, 2021
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Chief Executive Officers of All National Banks, Federal Savings Associations, and Federal Branches and Agencies; Department and Division Heads; All Examining Personnel; and Other Interested Parties
The Office of the Comptroller of the Currency is issuing this bulletin to remind banks1 that they are prohibited from making most equity investments in venture capital funds.
This bulletin applies to community banks.
Please contact Roman Goldstein, Risk Specialist, Treasury and Market Risk Policy, at (202) 649-6360.
Grovetta N. Gardineer
Senior Deputy Comptroller for Bank Supervision Policy
1 "Banks" refers collectively to national banks, federal savings associations, and federal branches and agencies of foreign banking organizations.
2 Refer to 12 USC 24(Eleventh), 15 USC 682(b), 12 CFR 24, and 12 CFR 7.1015. Additionally, subject to specific regulatory requirements, banks may establish operating subsidiaries and make non-controlling equity investments in entities that conduct bank permissible activities; these investments must be convenient and useful to the bank's business and not mere passive investments. Refer to 12 CFR 5.34, 5.36, 5.38, and 5.58.
3 Refer to 12 CFR 44.10(c)(16).
4 Refer to 12 CFR 1.5, 44.20, and 160.1. It is an unsafe or unsound practice to make investments without determining their appropriateness. Refer to In re FNBT Wibaux, Mont., Enf. Action 413, 1991 WL 535322, page 11 (October 31, 1991). It is also an unsafe or unsound practice to buy securities with long maturities, including equity securities, without a pre-purchase analysis, and when the desire for yield causes management to overlook normal prudential controls. Sound investment practices dictate that management must understand the structure and price sensitivity of its security purchases, as well as how they affect the bank's overall interest rate risk profile. Refer to OCC Bulletin 2002-19, "Unsafe and Unsound Investment Portfolio Practices: Supplemental Guidance." Management should know and understand the risks and rewards of each equity security before purchasing. Management should have a logical reason for the investment and know whether the investment is within legal limitations. Refer to the OCC's An Examiner's Guide to Investment Products and Practices, page 18 (December 1992).
5 Refer to OCC Bulletin 2018-41, "OCC Enforcement Actions: OCC Enforcement Action Policies and Procedures Manuals."
6 Refer to 12 USC 93(a).