The Office of the Comptroller of the Currency laid out what specific steps banks should be taking as it ups its scrutiny of risk management practices and encourages supervisors to exercise discretion in exams.

Following the recent industry tumult after three bank failures, the OCC's supervisory focus will be "risk management, risk management, risk management," acting Comptroller Michael Hsu told reporters June 14. He reiterated that sentiment later in the day when the agency released its Semi-Annual Risk Perspective, saying the OCC "expects banks to be on the balls of their feet with regards to risk management, just as our examiners are."

As the agency ups its supervisory efforts, it is encouraging supervisors to use their discretion.

"Your supervisors have support to exercise discretion to weigh in and weigh what's meaningful to get banks to change their behavior," Hsu said to reporters. "Supervisors need to act. It's not enough to see something. See something, say something, and then act. That act part is really all about discretion."

He again stressed that banks should move to fix issues in a timely manner, or face serious consequences — keeping in line with a January speech with the same warning and a recent update to the OCC's enforcement manual laying out those potential consequences.

"If they don't fix things, it's clearly laid out there what we're going to do. Delay adds to another problem. It's repeated. That's a management problem," Hsu said.

In a statement releasing the agency's semiannual risk perspective, Hsu cautioned that banks should not have "a false sense of comfort" as credit quality measures remain benign and markets stabilize following the recent turmoil stemming from the collapse of three regional banks.

Hsu recommended that banks take action to reevaluate their exposures, particularly asset and liability concentrations, "across a range of scenarios." They also should work to preserve capital and maintain strong liquidity, consistent with their risk profiles, he said. The OCC official also stressed that banks should act now to address risk, "not just in response to headlines."

The official also warned that banks should be "preparing to communicate clearly, credibly, and promptly about their condition and risk profile" in response to questions from customers, investors, depositors and other stakeholders.