The Federal Deposit Insurance Corporation recently approved an interim final rule to allow well-managed community banks and thrifts with less than $1 billion in total assets to qualify for an 18-month examination cycle. The previous threshold was $500 million for banks and thrifts with a composite rating of good or excellent at the most recent examination.
In December, Congress adopted legislation giving federal banking agencies the authority to increase the number of community banks and savings institutions eligible for the 18-month exam cycle. Previously, these institutions were required to undergo a full, on-site examination by the appropriate federal banking agency at least once every 12 months.
In a statement at the FDIC board meeting in January, OCC Comptroller of the Currency Thomas J. Curry announced his support of the plan and indicated he had signed an identical rule for national banks and federal savings associations supervised by the OCC.
“The 18-month exam cycle, which has been limited to institutions with less than $500 million in assets, struck me as an area where we could offer meaningful regulatory relief to a large group of community banks and thrifts with very little safety and soundness risk,” Curry said in remarks before the FDIC board.
“While the 18-month cycle will reduce the burden on well-managed community banks and thrifts, it also will allow the federal banking agencies to focus our supervisory resources on those institutions that need it most — those that present capital, managerial, or other issues of significant supervisory concern,” he said. “We don’t have unlimited supervisory resources, and it’s important that we manage those resources wisely. This rule will help greatly in that effort, and I’d like to thank the staff at the OCC, the FDIC and the other agencies for the work they’ve done to move it forward.”
Meanwhile, the National Association of Federal Credit Unions called on the National Credit Union Administration to adopt a similar 18-month rule for credit unions.
“Given the recent FDIC action to allow certain banks an 18-month exam cycle, NAFCU again calls upon the NCUA to lengthen the exam cycle for healthy, well-run credit unions,” NAFCU President and CEO Dan Berger said in a statement following the FDIC’s action. “Credit unions did not cause the financial crisis, are in extremely sound shape as an industry and do not need the additional burden of more-frequent exams. Lengthening the cycle also will save NCUA resources for credit unions that are facing challenges and need more oversight. We appreciate that the NCUA has indicated it is open to an 18-month exam cycle, and we urge the agency to approve this much-needed relief for credit unions as soon as possible.”