Alert August 28, 2012

OCC Issues Handbook Booklet on Banks’ Management of Unique and Hard-to-Value Assets

The OCC issued new guidance to examiners and bankers, in the form of a handbook booklet (the “Booklet”), concerning assessing a bank’s management of unique and hard-to-value assets when the assets are held in fiduciary or custody accounts maintained by the bank.  The OCC said that such unique and hard-to-value assets, which require specialized expertise, controls and valuation methods, can include, e.g., marketable securities (not traded on a financial market), real estate, mineral assets, timber interests, shares of closely held companies, life insurance policies and collectibles.

The Booklet discusses operational, compliance, strategic and reputation risks associated with management of unique and hard-to-value assets and describes risk mitigation techniques.  The Booklet also describes bank regulatory examination procedures used by the OCC when examining a bank’s management of unique and hard-to-value assets, and when evaluating the quantity of the Bank’s risk and the quality of the bank’s risk management of such assets.