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A bank supervised by the Office of the Comptroller of the Currency (OCC) filed a formal appeal with the Deputy Comptroller. The bank contested a matter requiring attention (MRA) cited in a report of examination (ROE) that directed it to divest certain equity shares.
The appeal raised three primary objections to the required corrective action. The appeal asserted that it sought guidance from the supervisory office (SO) prior to entering the transaction and was informed that there was no applicable guidance. The appeal asserted that OCC Interpretive Letter (IL) 1075 permits retention of the equity shares for investment purposes. Finally, the appeal contended that divesting the equity shares within the 180-day time frame would likely result in significant financial loss. As an alternative, the appeal requested additional time to divest the shares if the Deputy Comptroller upheld the requirement to divest the investment.
The Deputy Comptroller conducted a comprehensive review of the bank’s formal appeal using the following supervisory standard in effect at the time of the examination:
The Deputy Comptroller concurred with the SO requirement that the bank divest the equity shares, determining that the bank lacked the legal authority to hold the shares for investment purposes. The Deputy Comptroller found that OCC IL 1075 does not address the specific type of equity investment at issue and therefore does not authorize its retention. The potential for financial loss did not change the legal assessment that the investment was impermissible. However, based on safety and soundness considerations, the Deputy Comptroller granted the institution additional time to divest. Specifically, the bank may divest the shares as soon as reasonably practicable or a pre-defined date noted in the appeal decision letter.
The Deputy Comptroller also noted that the SO initially cited the incorrect legal authority in the MRA and needed to revise the ROE to reference the appropriate statutory authority, i.e., HOLA, in support of the divestiture directive.
