• On November 1, The OCC announced that it is issuing a bulletin to provide banks with guidance regarding commercial loans to early-, expansion-, and late-stage companies (venture loans) due to heightened uncertainty and probability of failure. The OCC expects banks to engage in venture lending in a safe and sound manner supported by effective risk management systems, in full compliance with applicable regulations, and with appropriate documentation. The regulator warned that, “OCC examiners will scrutinize loan commitments that are underwritten without an adequate assessment of the borrower’s capacity to repay and will determine whether such loans should be subject to supervisory criticism. Examiners will ask banks to determine the impact that any weak venture loan underwriting standards may have on the assumptions used in calculating loan loss reserves.”

The bulletin discusses venture lending risks, appropriate venture lending risk management practices, and provides guidance for risk-rating venture loans and evaluating repayment capacity.

  • On November 1, Reuters reported that the FDIC is investigating First Republic Bank directors and officers for potential misconduct related to the collapse of First Republic in May of this year following the collapse of Silicon Valley Bank and Signature Bank, who are already the target of FDIC investigations. The FDIC did not provide further details.

The investigations are probing whether directors and management broke rules requiring them to act in the bank’s best interests. As stated by Reuters, “Under federal law, the FDIC can ban former directors and officers from the industry, and impose fines for breaching their fiduciary duty and unsafe or unsound practices that involve dishonesty or “willful or continuing disregard” for a bank’s well being.”

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