Appeal of Memorandum of Understanding - (First Quarter 2003)

Background

A bank appealed the OCC's decision not to terminate an informal enforcement action (action).  The action was placed on the bank to address concerns regarding credit administration issues and a high level of criticized assets that were not being dealt with in a satisfactory manner.  The appeal stated that each of the items in the action had been addressed with changes in policies and procedures made and implemented.  The last report of examination stated that the bank was in full compliance with the MOU.  In addition, a letter from the supervisory office absolved the bank from any reporting requirements under the action.

Discussion

While the supervisory office acknowledged that the bank was in compliance with all of the articles of the action and had been absolved from the reporting requirements, the decision to keep the under the action was primarily to:

• Make sure that it continued to address the existing asset quality problems, and
• Ensure that the initiatives implemented as a result of the action became an integral component of the credit culture.

Conclusion

Considering all of the dimensions of the action coupled with the current asset quality concerns, the ombudsman determined that the existing informal action was not the best vehicle to address the current concerns.  Therefore, the supervisory office terminated the action and replaced it with a written commitment from the board of directors.  The directorate committed to continue the same lending practices that brought the bank into compliance with the former action and dedicated their best efforts to reduce classified assets to an acceptable level.  Each of the members of the board signed the new resolution.