Agencies reduce regulatory burden for community banks, increase eligibility for 18-month exam cycle

The Federal Reserve, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation issued an interim final rule increasing the asset threshold for community banks to qualify for an 18-month on-site examination cycle. The change raises the limit from $3 billion to $6 billion for certain supervised institutions, reducing regulatory burden for eligible small, low-risk banks. Institutions must remain well managed and well capitalized to qualify under the updated criteria. The rule applies to U.S. branches and agencies of foreign banks as well.

The rule implements a provision of the 21st Century ROAD to Housing Act, which directed regulators to expand eligibility for the extended exam cycle. The Federal Reserve and other agencies stated that extending the cycle from 12 to 18 months reduces time and resources spent on examinations for qualifying institutions. Off-site monitoring will continue between scheduled exams to maintain supervisory oversight.

The interim final rule takes effect immediately upon publication in the Federal Register, with a 30-day comment period open for public input. The Federal Register notice outlines the expanded eligibility criteria and parallel changes for foreign bank branches. Regulators emphasized the rule’s role in tailoring supervision to risk profiles while maintaining safety and soundness standards.

The agencies noted that the change aligns with broader efforts to reduce regulatory burden for community banks without compromising supervisory effectiveness. The rule applies uniformly across all eligible institutions, including those with assets between $3 billion and $6 billion that meet the established criteria.