Supervision & Ratings
Memorandum of Understanding
Also known as MOU
A Memorandum of Understanding (MOU) is an informal, non-public supervisory agreement between a bank and its regulator. MOUs are an intermediate step between informal supervisory communication and formal enforcement action.
How is Memorandum of Understanding defined?
An MOU outlines specific corrective actions the bank agrees to take, with agreed-upon deadlines. Unlike consent orders (formal, public), MOUs are informal and not published. The bank typically discloses the existence of an MOU only if required by securities law or if it materially affects operations.
Why does Memorandum of Understanding matter?
MOUs are the most common informal supervisory action. Regulators use MOUs when concerns warrant management attention and commitment but do not yet rise to the level requiring public formal action. Resolution typically takes 12-24 months; failure to resolve can escalate to a public consent order.
How do you interpret Memorandum of Understanding?
The non-public nature of MOUs makes them invisible to most market participants. Banks subject to MOUs may face the same operational restrictions as banks under consent orders (limits on growth, dividends, M&A) but without the public disclosure. Sophisticated counterparties and large depositors sometimes ask about MOU status in due diligence.
What do Memorandum of Understanding levels indicate?
| Range | Label | Interpretation |
|---|---|---|
| None | Clean | No supervisory agreement. |
| Active narrow MOU | Topic-specific | Focused on a single subject. |
| Active broad MOU | Significant | Multiple risk-management subjects. |
| Failed MOU → escalation | Severe | Concerns escalated to public action. |
Worked example
Frequently asked
Are MOUs public?
No. MOUs are confidential supervisory communications. They are not posted in agency enforcement databases. Banks may voluntarily disclose them or be required to do so under SEC disclosure rules if material.
Can BankRegReports show me which banks have MOUs?
No, and neither can any external data provider. MOU status is supervisory confidential. The /events/ section shows only public formal enforcement actions (consent orders, C&D orders, civil money penalties); MOUs are excluded.
What happens if a bank doesn't resolve an MOU?
The regulator can escalate to a public formal action, typically a consent order under §1818(b). The escalation makes the previously-confidential concern visible to the public and counterparties.
Sources
- Confidential supervisory communications (not publicly disclosed)
- FDIC Risk Management Manual of Examination Policies
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