The simple version

Unsafe or unsound practice is the legal hook the government reaches for when it moves against a lender. The law that uses it never defined it, and the working description has been one read into Congress in 1966.

Two overseers have now written a definition into regulation, in identical words, for the firms each of them covers. It has two prongs joined by an and, so clearing one of them is not enough.

The first prong asks whether the behavior runs against accepted standards of prudent operation. The second asks about money: whether the behavior harmed the firm's finances, or threatens a loss to the federal fund that stands behind deposits.

The numbers

• Joint final rule of the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation, Unsafe or Unsound Practices, Matters Requiring Attention, citation 91 FR 56004, published September 1, 2026, effective November 2, 2026 (Federal Register document 2026-17823)
• The rule carries two regulation identifiers, 1557-AF35 for the OCC and 3064-AG16 for the FDIC, and amends 12 CFR part 4 and 12 CFR part 305 (same document)
• The stated purpose is to define the term unsafe or unsound practice for purposes of section 8 of the Federal Deposit Insurance Act and to revise the supervisory framework for the issuance of matters requiring attention and other supervisory communications (same document, summary)
• The document states that the statute does not define the term, and that some courts have looked to a standard articulated by the then chairman of the Federal Home Loan Bank Board during congressional hearings on the Financial Institutions Supervisory Act of 1966 (same document, supplementary information)
• The OCC adds 12 CFR 4.92, Enforcement and supervisory standards, covering national banks, Federal savings associations, and Federal branches or agencies of foreign banks (same document, regulatory text)
• The FDIC adds a new 12 CFR part 305, Enforcement and Supervision Standards, with section 305.1 covering insured State nonmember banks, insured State licensed branches of foreign banks, and insured State savings associations (same document)
• Prong one of the definition: the practice, act, or failure to act is contrary to generally accepted standards of prudent operation (same document, 12 CFR 4.92(b)(1) and 305.1(b)(1))
• Prong two of the definition: if continued it is likely to materially harm the financial condition of the institution or present a material risk of loss to the Deposit Insurance Fund, or it materially harmed the financial condition of the institution (same document, 4.92(b)(2) and 305.1(b)(2))
• On matters requiring attention, the text says a regulator may only issue one for something that satisfies prong one and, if continued, could reasonably be expected under current or reasonably foreseeable conditions to cause that material harm, or did cause it, or that is an actual violation of a banking or banking-related law or regulation (same document, 4.92(c) and 305.1(c))
• Harm to financial condition is defined as financial losses or other negative impacts to an institution's capital, asset quality, earnings, liquidity, or sensitivity to market risk (same document, 4.92(d) and 305.1(d))
• The text requires tailored application, scaled to the risks associated with the institution's capital structure, complexity, activities, asset size, and any other financial risk-related factor the regulator deems appropriate, and states that as that risk increases, the threshold for materiality of the harm decreases (same document, 4.92(e) and 305.1(e))
• A correction published September 22, 2026, at 91 FR 59987, changed the OCC docket number printed in the original document to Docket ID OCC-2025-0174 (Federal Register document 2026-19312)

The two prongs, and the lower bar for a written finding

Prong one asks a question about conduct. Did the behavior run against accepted standards of prudent operation, which is a judgement about how a careful firm behaves rather than a reading of any single line.

Prong two asks a question about money, and it is the one doing the real work. Either the behavior already harmed the firm's finances, or continuing it is likely to damage them or to put the federal fund that stands behind deposits at risk of loss.

Harm is defined narrowly and in money terms: losses or other negative effects on capital, asset quality, earnings, liquidity, or sensitivity to market risk. A worry that does not land in one of those five places does not clear prong two.

A written finding from an examiner gets a separate and looser standard. There the behavior need only be something that could reasonably be expected to cause that harm, rather than something likely to, and there is a second door: an actual violation of a banking law clears it on its own.

The actual math the definition does not supply

Nothing here is quantified. There is no dollar figure, no ratio and no percentage attached to the word material, and the document supplies none.

What it supplies instead is a direction of travel. The wording requires the standard to be scaled to the firm, and says that as the risk tied to a firm's size, structure and activities rises, the bar for what counts as material harm drops.

So the same behavior can clear the definition at one firm and not at another. That is written into the document rather than being a gap in it.

The one countable thing is the shape. Two prongs for the definition, both required, and for a written finding two alternative doors, either one sufficient.

What this means

For anyone reading news about the government moving against a lender, this is the phrase the story turns on. From November 2 it has a meaning written into regulation, and the meaning has a money question inside it.

It is worth separating two things headlines blur. A written finding from an examiner and a formal action are different instruments with different standards, and this document makes the gap between them explicit.

Nothing here changes deposit insurance or what it covers, which is a separate subject with its own rules. The definition governs when the government may act and what an examiner may put in writing, not what happens to insured money.

What this is NOT

This article explains the two-prong definition adopted for unsafe or unsound practice and the separate limit placed on matters requiring attention, using the joint final rule of the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation at 91 FR 56004, published September 1, 2026, effective November 2, 2026, together with the correction at 91 FR 59987 published September 22, 2026, both read on October 18, 2026. It is not a claim that the phrase had no meaning before: the document notes that the statute does not define it and that some courts looked to a standard stated during congressional hearings in 1966, and this article does not describe how courts have applied that standard. It takes no position on whether the definition is too broad or too narrow, on whether the rule strengthens or weakens supervision, or on the policy debate around it, and it does not characterize the merits of any view. It is not a statement about any particular lender, and nothing here suggests that any firm is safe, unsafe, well run or poorly run. It is not a claim about anyone's deposits: this rule governs supervisory and enforcement standards and does not change deposit insurance, its limits or its coverage. It states no dollar figure, ratio or percentage for materiality, because the text states none, and it performs no arithmetic. It is not legal or compliance advice and it is not a complete account of section 8 of the Federal Deposit Insurance Act or of either regulator's supervisory process. It does not name the officials who signed the documents or the staff listed as contacts. This is not a political endorsement or criticism of anyone.

Sources

• Office of the Comptroller of the Currency and Federal Deposit Insurance Corporation, Unsafe or Unsound Practices, Matters Requiring Attention, joint final rule, RINs 1557-AF35 and 3064-AG16, 12 CFR parts 4 and 305, citation 91 FR 56004, Federal Register document 2026-17823, published September 1, 2026, effective November 2, 2026, read October 18, 2026
• Office of the Comptroller of the Currency and Federal Deposit Insurance Corporation, Unsafe or Unsound Practices, Matters Requiring Attention; Correction, citation 91 FR 59987, Federal Register document 2026-19312, published September 22, 2026, read October 18, 2026