Key perception: The Office of the Comptroller of the Currency is paring down practically all community bank regulatory measures not required by legislation, leaving it up to examiners to decide relevant necessities. Expert quote: “Community banks have an outsized impression on lending and are important to the power of the U.S. economic system. Today’s actions relieve these banks of regulatory burden and unproductive reporting necessities, so they’re higher positioned to help their communities and drive financial development.” — Comptroller of the Currency Jonathan V. Gould.Supporting knowledge: Banks with $30 billion or much less in belongings are thought-about community banks by the OCC.
The Office of the Comptroller of the Currency Monday introduced new measures to cut back its non-statuatory oversight of small banks, limiting its scope to probably the most basic banking dangers and permitting examiners to decide when and to what extent to intervene with the banks they oversee.
The company additionally requested public touch upon two proposed guidelines: one to repeal the Fair Housing Home Loan Data System regulation, which the company says is a “largely duplicative knowledge assortment requirement,” in addition to a separate proposal to enable community banks to be eligible for fast-track licensing approvals.
“The OCC will proceed to prioritize reforms focused to community banks forward of broader reforms for the business,” the OCC launch acknowledged. “Ongoing work contains adjusting the community bank leverage ratio framework and a simplified strategic plan course of for community banks to adjust to the Community Reinvestment Act.”
Beginning Jan. 1, 2026, the OCC will get rid of policy-based examination necessities not mandated by legislation, as a substitute giving examiners and regulators a free hand in figuring out what sorts of examination to conduct on community banks. Examiners will as a substitute use a totally risk-based strategy, tailoring examination frequency and scope to every bank’s measurement, complexity and danger profile. The OCC says the transfer will depend on examiner discretion and simplify the burden on small corporations.
“When acceptable for a community bank’s actions and danger profile, examiners will conduct acceptable examination actions. This could embrace streamlined testing strategies, extra restricted sampling, and reliance on bank-provided experiences as acceptable for a community bank’s actions and measurement, complexity, and danger profile,” the bulletin acknowledged. “As wanted, examiners may also conduct observe up actions for issues requiring consideration, violations of legislation, and enforcement actions at acceptable instances.”
In a separate transfer, the company additionally stated it should cease utilizing its advanced examination procedures for community banks that promote funding merchandise like mutual funds or annuities, arguing the outdated course of was too advanced for smaller establishments. The change means community banks will not be examined below the detailed Retail Nondeposit Investment Products, or RNDIP, handbook, which lays out strict danger administration and compliance procedures for promoting uninsured funding merchandise. Community banks, which the OCC defines as these with up to $30 billion in belongings, will as a substitute be reviewed below extra normal supervisory pointers.
In a 3rd bulletin the company clarified that smaller banks not want to conduct yearly opinions of the monetary fashions they use to handle danger, value loans or set capital ranges. The company stated banks can resolve how usually to validate their fashions based mostly on measurement, complexity, and danger publicity, and promised not to penalize establishments that take a lighter-touch strategy.
“The OCC won’t present damaging supervisory suggestions to a bank solely for the frequency or scope of the mannequin validation that the bank fairly decided to carry out based mostly on the bank’s danger exposures, its enterprise actions, and the complexity and extent of its mannequin use,” the bulletin acknowledged. “To be certain that flexibility for mannequin danger administration is maintained going ahead, the OCC will emphasize that message internally with its community bank examination groups.”
The company individually proposed a rule to scrap a requirement that banks acquire and report honest housing dwelling mortgage knowledge, saying the regulation is duplicative and out of date. The OCC claims the elimination of the requirement won’t come on the expense of its capacity to monitor housing discrimination.
“The OCC has undertaken a assessment of [the rule] and decided that the regulation is out of date and largely duplicative of and inconsistent with different authorized authorities that require nationwide banks to acquire and retain sure info on purposes for dwelling loans,” the proposed rule announcement acknowledged. “Moreover, [the rule] imposes asymmetrical knowledge assortment necessities on nationwide banks in contrast with their different depository establishment counterparts, and the information collected have restricted utility.”
The company proposed one more rule loosening licensing necessities for community banks. Under the proposed rule, community banks could be eligible for sooner approvals on mergers, reorganizations and different company actions requiring company approval. Under the plan, qualifying community banks with clear regulatory data would have computerized entry to the truncated filings procedures for purposes, permitting small lenders to compete higher inside the business in accordance to OCC.
A high banking commerce group applauded the transfer Monday, with American Bankers Association President Rob Nichols calling it widespread sense.
“The steerage and proposed rulemakings will assist be certain that particular person establishments are topic to supervision that’s acceptable to the dangers offered by their services and products and that regulators hold their give attention to materials monetary dangers that straight have an effect on the protection and soundness of the nation’s banks and our monetary system,” Nichols wrote in an announcement. “We recognize Comptroller Gould’s commonsense strategy to regulation and supervision, which can assist America’s community banks proceed to meet the wants of their prospects and communities each now and sooner or later.”
