OCC publishes bank guidance on shortening the standard settlement cycle following SEC final rule

Bank Regulatory OCC SEC Broker-Dealer Settlement

On January 17, the OCC issued its OCC Bulletin 2024-3 which highlighted the actions banks should take to prepare for the upcoming changes to the standard settlement cycle. These new changes are designed to “reduce the credit, market, and liquidity risks” in securities transactions. According to the OCC Bulletin, these banking rules follow the SEC’s final rule that shortened the standard settlement cycle from the second business day after the trade (T+2) to the first business day after the trade (T+1). As previously covered in InfoBytes, the settlement cycle was last shortened from (T+3) days to (T+2) days in 2018. The OCC encouraged banks to prepare for the T+1 change since it will affect many banking activities; accordingly, the OCC listed many factors that a bank’s management should consider when identifying systems and changes to enhance.

This Bulletin replaces and rescinds OCC Bulletin 2017-22 and OCC Bulletin 2018-05, both related to the shortening of the settlement cycle. The rules will go into effect on May 28, 2024, and the OCC expects banks to be prepared by then.