Business A new banking rule defining an unsafe practice takes effect November 2 By Brian Lund, Federal banking regulators have rewritten one of the oldest and vaguest phrases in bank oversight: “unsafe or unsound practice.” For decades, examiners leaned on that phrase to flag almost anything about how a bank ran itself, from thin paperwork to slow fraud controls, often without a fixed legal definition to point back to. A new final rule from two of the country’s top bank regulators narrows that authority so it focuses on risks that could actually hurt a bank’s finances or drain the federal fund that insures deposits. The change does not touch anyone’s checking or savings account directly, but it resets how closely, and for what reasons, the bank holding that money gets examined. A Legal Definition for a Phrase Regulators Used to Improvise The Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation finalized the rule on August 27, 2026, and it becomes effective November 2, 2026, according to the Federal Register notice the agencies filed. The notice defines an “unsafe or unsound practice” as a practice, act, or failure to act that is contrary to generally accepted standards of prudent operation and is likely, if continued, to materially harm a bank’s financial condition or present a material risk of loss to the Deposit Insurance Fund, the reserve that backs insured deposits when a bank fails. Under the prior, undefined standard, examiners could cite banks over concerns that never touched a bank’s bottom line, including internal policies, documentation gaps, and reputational worries unrelated to financial condition. The new definition excludes reputation risk that has no financial component, and it requires a showing that harm is likely, not merely possible.