A golden opportunity has been lost
On November 7, the FDIC announced a change to the consumer compliance examination cycle. Consumer compliance issues pertain to topics including Truth in Lending, Real Estate Settlement Procedures, Flood Insurance, the Equal Credit Opportunity Act, The Fair Housing Act, the Home Mortgage Disclosure Act, to name a few of the consumer laws and regulations. In addition the amended exam cycle pertains to the Community Reinvestment Act. The announcement is the latest in a series of announcements that reflect the Trump Administration's emphasis on relaxed regulatory enforcement.
The changes are laid out in a series of 7 tables reflecting the “before and after” examination cycles. The tables are organized as a matrix with CRA performance ratings matched with consumer compliance ratings. The tables also are organized based on bank asset sizes of $350 million or less (Table 2) and more than $350 million pre-November 7 (Table 3). Those size categories are maintained in the post November 7 manual except that the $350 million or more category is broken into $350 million or more and less than or equal to $3 billion asset size and a new Table 4 is added pertaining to banks with more than $3 billion in assets. All asset sizes are based on the last 2 calendar year Call Reports. There also is a table 1 that depicts the cycle that is for banks during their first 24 months under the FDIC. To sum up, the 7 tables compare the old and the new exam cycles.
So what’s the big change?
The changes can be complicated by comparing the different combinations of ratings. So to keep things simple, we evaluated the before and after comparisons based on “satisfactory” CRA and Consumer Compliance Ratings. Those comparisons show far longer intervals between examinations for banks that have satisfactory performance ratings.
For example, when we compared the cycle for banks in the asset size category greater than $350 million a typical exam cycle pre-November 7, would have been 24 to 36 months if they had satisfactory CRA and Consumer Compliance ratings. Now, with the new schedule, their performance examinations could be as many as 66 months apart.
Figure 1: Pre-November 2025 Consumer Compliance Examination Cycle
Figure 2: Post November 2025 Consumer Compliance Examination Cycle
For banks of $350 million asset size or less the exam cycle will be stretched even longer.
The pre-November 2025 exam frequency for banks up to and including $350 million in assets and that had received at least a satisfactory performance rating on their previous CRA examination the duration between CRA exams had been 60 to 72 months. The November 2025 exam cycle stretches that to as many as 78 months.
Figure 3: Small Banks CRA Examination Cycle pre-November 2025
Figure 4: Post November Exam Cycle for Banks up to $350 million assets size
Also note that the November 2025 new examination cycles have added a new and separate table 4 for banks that are greater than $3 billion in assets.
Figure 5: New Table 4 for banks with more than $3 billion in assets
A review of the foregoing table indicates no change in examination cycles for large banks with satisfactory performance evaluations.
Clearly, the winners in this new compliance practice are the small banks up to and including $3 billion asset banks. However, a big problem with this new schedule is that banks that don’t meet the “large bank” threshold (85% of banks subject to CRA requirements) are not mandatory reporters under CRA. Therefore, with longer intervals between exams it means little or no public information will be available regarding CRA performance for 51/2 to 61/2 years between exams for almost 7 of every 8 banks subject to the CRA!
This is not only harmful to the public’s interest, but it also is against the best interests of the small institutions because it means their ability to evaluate their performance against true peer institutions is almost impossible. Currently, the only way to get that data is to retrieve the CRA performance evaluations of peer lenders that are not CRA reporters. Now, getting timely information that would be useful to evaluate CRA performance won’t be possible for non-reporting banks.
A possible solution to this dilemma would be to require the small banks to report under CRA. It would have been ideal to offer an extended exam cycle as an inducement for small banks to voluntarily report under CRA. With the free CRA software available from the FFIEC the cost for reporting for small banks should be less than $1,000 annually. Now that opportunity has been lost.
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