Regulators’ Christmas Gift to Banks: 18-Month Examination Cycle

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December 28, 2016

Earlier this month, the Office of the Comptroller of the Currency, Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation issued final interagency rules which will reduce regulatory compliance costs for over 600 banks and savings associations.

Section 10(d) of the Federal Deposit Insurance Act (FDI Act) generally requires the appropriate Federal banking agency for an insured depository institution (IDI) to conduct a full-scope, on-site examination of the institution at least once during each 12-month period.  However, under the FDI Act, if an IDI has less than $500 million in total assets and meets other requirements, a full-scope, on-site examination is only required once every 18-months.

Included in the Fixing America’s Surface Transportation Act (FAST Act) was an amendment to the FDI Act to increase the total asset threshold of a financial institution eligible for an 18-month examination period.  Under the interagency final rules, qualifying well-capitalized and well-managed banks and savings associations with less than $1 billion in total assets are now eligible for an 18-month examination cycle.

You might be asking, what does bank regulation have to do with surface transportation? The answer – nothing.  But, small and community financial institutions will take regulatory relief wherever and whenever they can get it.  Congress’ common sense amendment to the FDI Act will help reduce regulatory costs while still ensuring that financial institutions remain well regulated.

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