This Week in Credit Risk: A New Concentrations Booklet, a Bank Failure, and Soft Payrolls

The OCC Rewrites Its Concentrations of Credit Booklet

On September 30 the OCC issued version 3.0 of the “Concentrations of Credit” booklet of the Comptroller’s Handbook, replacing version 2.0 from 2020. The definition hasn’t changed: a concentration is still direct, indirect or contingent obligations that exceed 25% of tier 1 capital plus the allowance for credit losses.

Most of the change is in organization and depth. Material on quantity of risk now sits in one section on the risks of concentrations. The booklet adds discussion of how correlations relate to concentrations, how securitizations affect concentration levels, and how to determine aggregate risk. It also lays out ranges of practice for banks of different sizes and risk profiles, and examiners decide which expanded procedures to use, if any, based on risk.

If your concentration reporting was built against the 2020 booklet, the correlation and aggregate risk sections are the parts to compare with what you send the board. The booklet lands a month before the OCC and FDIC’s new MRA standard takes effect on November 2.

Nano Banc Is the Sixth Bank Failure of 2026

California regulators closed Nano Banc on September 25 and named the FDIC receiver. Sunwest Bank of Sandy, Utah, took on substantially all of the deposits and bought about $476 million of Nano Banc’s $736 million in assets. The FDIC’s preliminary estimate of the cost to the Deposit Insurance Fund is $114 million.

The FDIC kept the assets Sunwest didn’t buy and will sell them over time, so that cost estimate is expected to change. Nano Banc had a single branch, which reopened as a Sunwest branch on September 28. It’s the sixth name on the FDIC’s failed bank list for 2026.

Credit unions had a closure too. On September 30 the NCUA liquidated Jackson Area Federal Credit Union in Jackson, Mississippi, a roughly $60 million institution with 15,704 members, after finding it insolvent and operating in an unsafe and unsound manner. Five Star Credit Union of Dothan, Alabama, bought assets and took over its members’ share accounts.

September Payrolls Rose Only 29,000

The BLS reported on October 2 that payrolls grew by 29,000 in September and unemployment was 4.2%, both little changed. July and August were revised down a combined 60,000, which turns July into a loss of 10,000 jobs.

Job gains averaged 45,000 a month over the prior 12 months, so September was soft even by this year’s standards. Average hourly earnings rose 0.1% for the month and 3.0% over the year. Construction added 11,000 jobs and manufacturing 9,000, while financial activities lost 7,000.

It’s the last jobs report the Fed will have before it meets October 27 and 28, its first meeting since the September rate increase. The October report is due November 6.

More Time to Comment on the Regulation O Overhaul

On October 2 the Federal Reserve pushed the comment deadline on its proposal to modernize Regulation O, the rule on loans to a bank’s executive officers, directors and principal shareholders, from October 5 to November 4.

It would be the first comprehensive update since 1979. The proposal raises dollar thresholds last adjusted in 1994 and would index them to nominal GDP every five years. The $500,000 threshold for prior board approval of an insider loan would become $2 million, and the cap on unsecured “other purpose” loans to executive officers would rise from $100,000 to $400,000. It also narrows when a fund group’s portfolio companies count as insiders of a bank the fund group partly owns.

Regulation O is a Fed rule, but federal law applies the same insider lending limits to state nonmember banks and savings associations, so banks supervised by the FDIC and OCC are covered as well. If the proposal is finalized, loan policies that quote the current dollar figures will need updating.

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