Summer 2020

Choice of Charters Redux: OCC Governance Proposals for National Banks and Federal Thrifts

Related Practices

Related Industries

Attorneys & Professionals

By Jeffery E. Smith and Scott A. Herkamp
(Published in the Summer 2020 issue of The Bankers' Statement)

On July 7, 2020, the Office of the Comptroller of the Currency (OCC), primary regulator for national banks and Federal thrifts, published a lengthy proposal for significant and extensive revisions to certain of its current regulations (the Proposal). The Proposal, contained in OCC Docket 2020-0003, addresses a number of OCC regulations, including a new proposed section regarding powers and permissible activities for national banks and Federal thrifts1. The Proposal also includes a comprehensive review of the OCC’s corporate governance regulatory framework, presently contained in 12 CFR Section 7.2000, as well as new proposed regulations impacting hours and closings. The Proposal is especially noteworthy, given that the OCC’s corporate governance regulations were issued in 1996 and have since remained relatively unchanged.

Governance is a critical element of institutional oversight and is extremely important for consideration by boards of all types of institutions. As bankers and their boards consider the best available form of charter for their institutions, governance considerations should play a very significant role. Governance considerations define the legal guidelines and expectations as to board oversight obligations and performance, shareholder rights, decision-making parameters, and the nature and extent of protections for directors (acting in their roles as directors). Boards should take the time to fully research and consider which types of governance models and protections are best for their institutions and their roles in those institutions, from powers and activities to fiduciary standards and permissible protections available for serving in their roles as directors.

Some of the more notable national bank and Federal thrift governance items of interest in the Proposal are summarized below:

1. Legal Framework for Governance Considerations

2. Anti-Takeover Provisions for National Banks

3. President as a Director

4. Indemnification of Directors, Officers and Other Institution-Affiliated Parties (collectively IAPs)


The Proposal helps illustrate the importance of considering and assessing, on a continual basis, what type of charter, governance structure and governance venue is best for an institution in light of its current and proposed activities and operations. It also illustrates the implications of these decisions on the ability of an institution to indemnify and to protect directors, officers and IAPs conducting the business of the institution. Forum shopping for the sake of forum shopping should not be the primary consideration. Instead, as part of their regular oversight responsibilities, boards should conduct a careful analysis of what type of charter, and what type of governance regime, is most appropriate for their particular institution.


1 New, proposed 12 CFR 7.100.