Agencies offer banks with $10B or less relief from rules triggered by pandemic-related asset bloat

Community banks that saw a surge of deposits during the coronavirus crisis – spurred in some cases by customers who received stimulus checks or funding through the Paycheck Protection Program – will receive some regulatory relief through the rest of this year and 2021, the federal banking agencies said Friday.

In a release, the Federal Deposit Insurance Corp. (FDIC), Federal Reserve and Office of the Comptroller of the Currency (OCC) announced an interim final rule (IFR) that gives banks with $10 billion or less (defined as community banks) to use their year-end 2019 financial results to determine the applicability of various regulatory asset thresholds during calendar years 2020 and 2021.

The IFR also temporarily revises instructions to a number of agency regulatory reports, the agencies said, “to provide that community banking organizations may use asset data as of December 31, 2019, in order to determine reporting requirements for reports due in calendar years 2020 or 2021.”

“Due to participating in federal coronavirus response programs—such as the { Small Business Administration’s (SBA)) Paycheck Protection Program—and other lending that supports the U.S. economy, many community banking organizations have experienced rapid and unexpected increases in their sizes, which are generally expected to be temporary,” the agencies wrote. “The temporary increase in size could subject community banking organizations to new regulations or reporting requirements.”

More specifically, the banking organizations that have crossed a “relevant threshold” will will have until 2022 to either reduce their size, or to prepare for new regulatory and reporting standards, the agencies said.

The reasoning behind the change: “Community banking organizations with under $10 billion in assets may have fewer resources available to prepare and comply with previously unanticipated regulatory requirements, especially during a time of economic disruption,” the agencies said.

Agencies provide temporary relief to community banking organizations