Agencies Issue Final Rule Extending Exam Cycle for More Banks

The federal banking agencies today issued a final rule implementing a provision in the S. 2155 regulatory reform bill that make qualifying banks with up to $3 billion in assets eligible for an 18-month on-site exam cycle. Prior to S. 2155’s passage, only banks with under $1 billion in assets were eligible.

Under the final rule, insured depository institutions, including federal or state branches of foreign banks, qualify if they have an “outstanding” or “good” composite rating. “The agencies believe that extending the examination cycle from 12 months to 18 months for these small IDIs with relatively simple risk profiles should not appreciably increase their risk of financial deterioration or failure,” they said.

The American Bankers Association has long advocated for raising the threshold of institutions eligible for an extended exam cycle. The rule will take effect 30 days after publication in the Federal Register.

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