OCC, FDIC: Reduced reg burden needed for community banks

The Office of the Comptroller of the Currency is prioritizing regulatory tailoring for community banks, Comptroller Jonathan Gould said Sept. 10 during a Financial Stability Oversight Council meeting. .Gould said the OCC will change the community bank leverage ratio framework and increase applicable regulatory asset thresholds when possible. Federal Reserve Vice Chair for Supervision Michelle Bowman suggested last month that the optional leverage ratio could be reduced to 8 percent from 9 percent, to increase participation and free up lending capacity. “Next week, I will be spending several days on site with our examiners as they wrap up a community bank examination and deliver feedback to management,” Gould said. “This experience will inform ongoing efforts at the OCC to revise our examination approaches to community banks for certain areas like fair lending, capital, liquidity, the Community Reinvestment Act and third-party risk management, with an eye to adjusting such approaches to reflect the low risks posed by community banking activities.”The OCC is also considering reducing the frequency of consumer compliance examinations to once every five years, with a review midway through the process. The latter change would be for most banks with less than $3 billion in assets. Also speaking during the FSOC meeting, FDIC Acting Chair Travis Hill said his agency is working toward raising the threshold of its continuous bank examination program to $30 billion from $10 billion. Both Gould and Hill said their agencies are now focusing more on material risks by eliminating the use of reputation risk and better defining unsafe and unsound practices. Gould said the regulatory changes are crucial following the 2023 failure of Silicon Valley Bank. “We have begun reviewing supervisory strategies across banks of all sizes with the goal of eliminating ongoing or targeted examination activities that are not related to material financial risks, thus shrinking the burden on banks posed by our exam activities, document information requests and the like,” he added.