Provisioning & OCC loan classification standards Agent AI

INVOKED WHEN: month-end batch runs or CBS flags an account crossing a DPD threshold requiring classification review

• –Reads the CBS DPD position for every active loan and applies the OCC loan classification standards classification rules: accounts at 90 DPD or more are classified Sub-Standard; accounts that have remained Sub-Standard for 12 months are classified Doubtful; accounts that have remained Doubtful for prescribed periods or where the recovery prospect is remote are classified Loss. Each classification is based on the DPD count alone — the OCC loan classification standards rules are mechanical, not judgment-based.
• –Checks for upgrade eligibility: an account that was classified as NPL / charge-off but has since regularised (all overdue amounts paid, account performing for at least the prescribed regularisation period under OCC loan classification standards) is eligible for upgrade back to Standard. The agent identifies upgrade-eligible accounts and flags them for the authorized official's review — upgrading an NPL / charge-off account is an equally regulated act as classifying one.
• –Produces the classification schedule — every account's current classification, the DPD basis for classification, and the change from the prior period's classification (new NPL / charge-off, upgrade, no change). The schedule is the authorized official's review document before sign-off.

INVOKED WHEN: NPL / charge-off classification schedule is finalised and provisioning requirements need to be computed

• –Computes the allowance for credit losses under ASC 326 (CECL) for each classified or charged-off account — estimating lifetime expected credit losses using probability of default (PD), exposure at default (EAD), and loss given default (LGD) by segment, collateral coverage, and risk grade. Fed / OCC criticized-asset and charge-off classification standards determine regulatory reporting categories and measurement inputs; the agent applies the institution's approved CECL model rather than fixed percentage schedules. The agent does not apply judgment beyond the approved CECL methodology and institution policy.
• –For secured accounts, reads the current security valuation from the security valuation store and computes the net unsecured exposure (outstanding balance minus current security value) — because the OCC loan classification standards provisioning rate applies to the unsecured portion, and the provisioning requirement for a secured NPL / charge-off with adequate collateral is materially lower than for an unsecured one.
• –Computes the aggregate provisioning requirement and compares it to the current provisioning balance on the general ledger — identifying the provision shortfall or surplus. Where the required provision exceeds the current provision, flags the shortfall for the CFO to authorise a GL provisioning entry.

INVOKED WHEN: quarterly board compliance reporting cycle or Fed / OCC regulatory submission is due

• –Produces the formal OCC loan classification standards compliance report: NPL / charge-off ratios (Gross NPL / charge-off, Net NPL / charge-off) by portfolio segment and product, movement in NPL / charge-off during the period (fresh NPLs, upgrades, write-offs, recoveries), provisioning coverage ratio, and a compliance note confirming that classification and provisioning have been applied in accordance with Fed / OCC credit risk classification guidance and institution policy.
• –Tracks changes in Fed / OCC credit risk classification guidance through the regulatory corpus — if Fed / OCC amends classification criteria or CECL-related supervisory expectations, the agent flags the change and updates the computation methodology before the next month-end run. OCC loan classification standards compliance is only as current as the regulatory corpus.