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New FDIC Rule on Extended Exam Cycle Eases Banks’ Regulatory Burden

Piggy BankThe Federal Deposit Insurance Corp. (FDIC) on Thursday approved an interim final rule that allows well-managed community banks and thrifts with less than $1 billion in assets to qualify for the 18-month on-site exam cycle.

Previously, only financial institutions with less than $500 million were eligible for the 18-month exam cycle. According to Comptroller of the Currency Thomas J. Curry, more than 600 institutions will be affected by the rule change. The regulatory change was included in the year-end highway bill.

“This is an idea that we at the OCC have been talking about for some time now in the context of the EGRPRA process—the Economic Growth and Regulatory Paperwork Reduction Act requirement that we take a periodic look at regulations that are unnecessary and overly burdensome,” Curry said Thursday at the FDIC Board meeting prior to the vote. “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 the regulatory change will also allow the OCC to focus its supervisory resources on institutions that need it the most, which are institutions that present capital, managerial, or other issues of significant supervisory concern.

In response to the FDIC approving the interim rule, National Association of Federal Credit Unions (NAFCU) President and CEO Dan Berger wrote a letter to the National Credit Union Administration (NCUA) asking NCUA to lengthen the exam cycle for credit unions from 12 months to 18 months. With the interim rule change announced Thursday, credit unions are the only federally regulated depository institutions that still fall under the strict 12-month exam cycle at the federal level.

“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,” Berger said.  “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 will also 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.”

About Author: Brian Honea

Brian Honea's writing and editing career spans nearly two decades across many forms of media. He served as sports editor for two suburban newspaper chains in the DFW area and has freelanced for such publications as the Yahoo! Contributor Network, Dallas Home Improvement magazine, and the Dallas Morning News. He has written four non-fiction sports books, the latest of which, The Life of Coach Chuck Curtis, was published by the TCU Press in December 2014. A lifelong Texan, Brian received his master's degree from Amberton University in Garland.

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