On October 6, the Office of the Comptroller of the Currency (OCC) announced a series of significant actions aimed at reducing the regulatory burden on community banks. These initiatives are part of the OCC’s ongoing efforts to tailor its regulatory and supervisory frameworks, thereby promoting economic growth and allowing community banks to better serve their communities.
Key Announcements:
- Examination Procedures Overhaul:
- In Bulletin 2025-24, the OCC announced that it is eliminating fixed examination requirements for community banks, effective January 1, 2026. Instead, the examination scope and frequency will be tailored to align with risk-based supervision. This change aims to reduce the supervisory burden while maintaining the safety and soundness of banks.
- Retail Nondeposit Investment Products (RNDIP):
- Bulletin 2025-25 states that the OCC will no longer use the comprehensive procedures in the RNDIP booklet for examining community banks. Instead, it will rely on the core assessment standards in the Community Bank Supervision booklet. This shift is intended to relieve unnecessary examination burdens and allow community banks to focus on mitigating material financial risks.
- Model Risk Management Flexibility:
- Bulletin 2025-26 encourages community banks to tailor their model risk management practices according to their risk exposures and business activities. The OCC clarified that annual model validations are not mandatory, providing banks with greater flexibility in managing model risks.
- Proposed Rulemakings:
- Rescission of 12 CFR 27: The OCC proposed rescinding the Fair Housing Home Loan Data System regulation, which imposes duplicative data collection requirements on national banks. This move is expected to reduce regulatory burdens without affecting the availability of necessary data for fair housing-related supervisory activities. Comments will be accepted for 30 days after publication of the notice in the Federal Register.
- Community Bank Licensing Amendments: The OCC proposed a new definition of “covered community bank or covered community savings association” and to provide such institutions access to expedited or reduced filing procedures. A “covered community bank or covered community savings association” would be defined as a national bank or federal savings association that: (1) has less than $30 billion in total assets and is not an affiliate of a depository institution or foreign bank with $30 billion or more in total assets; (2) is “well capitalized” as defined in 12 CFR 5.3; and (3) is not subject to a cease and desist order, a consent order, or a formal written agreement, that requires action to improve the financial condition of the national bank or federal savings association. The goal of the proposed rulemaking is to reduce regulatory burden and tailor requirements to the size and risk-profile of the institution. Comments will be accepted for 60 days after publication of the notice in the Federal Register.
Implications for Community Banks:
These initiatives reflect the OCC’s commitment to supporting community banks, which play a crucial role in the U.S. economy. By reducing regulatory burdens, community banks can allocate more resources toward lending and other activities that benefit their local communities. The proposed changes also signal a shift towards a more flexible and risk-based regulatory approach, which could enhance the competitive viability of community banks.
