More banks eligible for 18-month exam cycle as early as Wednesday

Interim final rules that are expected to qualify another 420 banks and savings associations for an extended, 18-month exam cycle take effect Wednesday, according to notices published jointly by federal banking agencies.

The rules, published in the Aug. 29 Federal Register and out for comment until Oct. 29, implement a provision of the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA, S. 2155) that applies an 18-month exam cycle to banks with less than $3 billion in assets, up from the current $1 billion threshold. EGRRCPA was enacted in May; the Federal Reserve Board, Office of the Comptroller of the Currency (OCC) and Federal Deposit Insurance Corp. (FDIC) announced the interim final rules Aug. 23.

The interim final rules provide that an exam will be conducted for a qualified institution – generally one that is well capitalized and well managed – with less than $3 billion in assets “not less than once” during an 18-month period (up from “not less than once” during a 12-month period). The regulators say qualifying banks under $3 billion that have an “outstanding” or “good” composite rating will be eligible for the extended cycle.

To qualify for an 18-month examination cycle, any insured depository institution with total assets under $3 billion – including one with a composite rating of “good” – must meet other capital, managerial, and supervisory criteria (set forth in section 10(d) of the Federal Deposit Insurance Act and the agencies’ implementing regulations), the agencies note.

The agencies say an estimated 420 banks and savings associations could qualify for the extended cycle under the interim final rule, which would bring the total number eligible to 4,798. About 33 U.S. branches and agencies of foreign banks would also be eligible, they said.

Expanded Examination Cycle for Certain Small Insured Depository Institutions and U.S. Branches and Agencies of Foreign Banks