OCC allows bank closures in Texas floods

Nationally chartered banks in parts of Texas were authorized to close Monday as needed, due to flooding in the state, according to a proclamation released by the Office of the Comptroller of the Currency.

Major flash floods in central and southern Texas, known as the state’s Hill Country, have killed over 80 people, leading the agency to declare the situation an emergency condition. Citing its 2012 bulletin on natural disasters as a framework, OCC advised affected banks’ on how to respond to the moment.

“The Comptroller of the Currency, or his designee, hereby authorizes national banking associations, federal savings associations, and federal branches and agencies of foreign banks at their discretion, to close offices in the areas affected by these emergency conditions for as long as deemed necessary for bank operation or public safety,” a release noted.  

The Monday announcement encourages bank leaders to consult OCC guidance on handling disruptions and customer needs during emergencies at a time when environmental shocks continue to strain local economies and financial institutions.

While the OCC declared an emergency in this case, even absent a formal disaster declaration, banks are allowed to take prudent actions to preserve lives and assets during extreme weather events under existing rules. In the event of widespread or prolonged disruption, the OCC’s guidance encourages banks to support affected customers by waiving fees, easing withdrawal penalties, restructuring loans, expediting lending decisions and offering financing to rebuild damaged property. As long as these actions are consistent with sound banking practices, OCC examiners are not supposed to criticize such extraordinary actions.

OCC, along with its fellow regulators, the Federal Reserve and the FDIC, took similar action in September 2023 when it joined an interagency statement extending regulatory relief to banks and credit unions affected by Hurricane Idalia. 

In August 2023, the OCC allowed federally chartered banks to temporarily close branches in areas affected by Tropical Storm Hilary. The decision aimed to prioritize the safety of bank employees and customers in western states experiencing hazardous conditions due to the storm.

Against the backdrop of extreme climate events in the U.S., federal banking regulators remain firm in their decision earlier this year to step back from coordinated international climate oversight. 

In February, the Office of the Comptroller of the Currency became the final U.S. prudential regulator to withdraw from the Network for Greening the Financial System, following similar exits by the Federal Reserve and Federal Deposit Insurance Corp. Acting Comptroller Rodney Hood has said the initiative, which aimed to address climate-related financial risks, fell outside the OCC’s statutory mandate. While the OCC has said it expects banks “to have effective risk management processes commensurate with their size, complexity and risk of their activities,” the agency under the Trump administration has repeatedly signaled a shift away from climate risk as a regulatory priority. 

A recent working paper by a Philadelphia Fed-affiliated researcher found banks that have more branches in areas hit harder by hurricanes, tornadoes, and severe storms tend to suffer more operational losses  — including costs from fraud, damaged property, and general interruptions. If a firm’s exposure to storm damage doubles, the paper found, these banks see about an 8.4% increase in operational losses. Researchers also found that the main drivers of such losses were storms officially declared disasters by the government. Banks that have experience dealing with storms tended to handle future ones better, showing some learning or improvement over time.