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A bank appealed the OCC's conclusions contained in the Report of Examination (ROE) regarding the bank's compliance with two articles in their formal agreement. Specifically, bank management disagreed with the OCC's noncompliance determination with articles focusing on loan administration and criticized assets.
The appeal was based on the following:
OCC's Policy and Procedures Manual (PPM) 5310-3 (REV), ''Bank Supervision Operations-Enforcement Action Policy,'' provides internal OCC guidance for assessing compliance with enforcement actions. The PPM states that a rating of compliance can only be achieved on a particular article if the bank has adopted, implemented, and adhered to all of the corrective actions set forth in the article; the corrective actions are effective in addressing the bank's problems; and OCC examiners have verified through the examination process that this has been accomplished. It also states that a bank should not be considered in compliance with an article in an enforcement document simply because they have made progress or a good faith effort toward complying with the article.
The PPM further states that articles for which a bank has not achieved compliance include those articles where the bank has adopted and begun the implementation of all of the corrective actions required by the article, but sufficient time has not passed to verify that the actions have been fully implemented, are being adhered to, and are effective in addressing the bank's problems. In these situations, there is nothing additional for management and the board to do other than fully implement, adheres to, and assesses the effectiveness of the corrective actions.
Both articles in the bank's formal agreement contain the following paragraph that requires not only the implementation of, but also the adherence to, the developed pro-gram under each of the corresponding articles:
The Board shall ensure that the Bank has processes, personnel, and control systems to ensure implementation of and adherence to the program developed pursuant to this Article.
Bank management had taken appropriate action to implement the policies and procedures to comply with these two articles. However, at the time of examination, given the relatively short time since implementation, the supervisory office could not assess the bank's adherence to the loan administration and criticized assets initiatives. Therefore, it was concluded that the supervisory office's assessment of noncompliance with articles, at the time of the examination, was appropriate and consistent with OCC's ''Enforcement Action Policy.''