Bank Regulators Expand Eligibility for Less Frequent Exams

The OCC, FDIC, and Federal Reserve Board issued an interim final rule raising the asset threshold for eligibility for an 18-month (rather than annual) on-site examination cycle from $3 billion to $6 billion for qualifying community banks.

The rule implements Section 903 of the 21st Century ROAD to Housing Act. The Act raised the asset threshold to permit, not require, the agencies to examine qualifying institutions once every 18 months instead of annually. To qualify, a bank must have less than $6 billion in total assets, it must be well-capitalized, and it must be rated 1 or 2 at its most recent exam, including a management rating of 1 or 2. It also must not be subject to a formal enforcement proceeding or order, and must not have undergone a change in control in the previous 12 months.

The agencies also made parallel changes to their regulations governing the on-site examination cycle for U.S. branches and agencies of foreign banks. The regulators noted they will continue off-site monitoring between scheduled exams and retain the authority to examine a bank on-site more frequently if necessary.

The interim final rule is effective immediately upon publication in the Federal Register. Comments are due by 30 days after publication in the Federal Register.