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Appeal of OCC Decision to Deny Two Branch Applications (Fourth Quarter 2006)


A bank, operating under a formal enforcement action, appealed to the ombudsman a decision rendered by the OCC’s licensing unit to deny applications to establish a branch in two local communities.  In its appeal, the bank acknowledged that the most recent examination found that supervisory issues still existed; however, a significant level of progress had been achieved.  The appeal also stated that without these branches the communities would have no access to local financial services.


In reviewing the applications, the licensing unit applied the factors under 12 C.F.R. § 5.30 - Establishment, Acquisition, and Relocation of a Branch1 and 12 C.F.R. § 5.13 - Decisions2 . The decision to deny the branch applications was based on its determination that branching raised significant supervisory concerns.

The supervisory office determined that the composite 3 rating would continue and the existing enforcement action against the bank would remain in place.  However, the examination also found that significant improvement in bank operations and board and management supervision had occurred.  Notwithstanding the bank’s composite 3 rating, improvements had been made that diminished the severity of the supervisory issues.  Additionally, management had made significant progress in complying with the enforcement action.

The ombudsman gave measured and careful consideration to all relevant regulatory factors and guidance set forth in the OCC’s licensing manual.  A review was performed of the information enclosed with the appeal, the OCC’s official record of the decision, and information obtained during an on-site visit to the bank.  Additionally, discussions were held with all OCC staff involved in the decision-making process.  The ombudsman also reviewed examination work papers and conclusions from the most recent safety and soundness examination.


The severity of the supervisory issues was considered for purposes of determining whether the bank was a significant supervisory concern.  The ombudsman concluded that the bank’s level of progress in addressing the supervisory concerns and the ongoing commitment by bank management and the Board to improve operations met the requirements under 12 C.F.R. 5.30 for approval of the branch applications.  The establishment of the branches would positively affect the local communities while having no material impact to the safe and sound operation of the bank.  Therefore, the ombudsman opined to approve the branch applications.

 1 OCC branching regulation (12 C.F.R. § 5.30(e) (1)-(4)) provides that OCC branching decisions be guided by the following principles: (a) maintaining a safe and sound banking system; (b) encouraging the bank to help meet the credit needs of its entire community; (c) that the marketplace is generally the best regulator of economic activity; and (d) encouraging healthy competition to promote efficiency and better service to customers.

 2 In accordance with 12 C.F.R. § 5.13(b) (1), the OCC may deny a filing if a significant supervisory, CRA (if applicable), or compliance concern exists with respect to the applicant.