In a letter to banking agencies, the American Bankers Association expressed support for the implementation of a new law expanding the number of banks that qualify for an 18-month examination schedule, although it had two suggestions for how to improve the proposal.
The 21st Century ROAD to Housing Act, which became law earlier this year, included language raising the asset threshold needed to qualify for the extended 18-month examination cycle, from $3 billion to $6 billion. The FDIC, Federal Reserve and Office of the Comptroller of the Currency have issued an interim final rule to implement the provision.
ABA said the interim rule “appropriately aligns supervisory requirements with institutional size and risk, preserving safety and soundness while reducing unnecessary regulatory burden.” Still, the association offered two recommendations.
First, the agencies should clarify whether the extended examination cycle applies to de novo banks during their first three years of operation, ABA said. Second, the agencies should provide guidance identifying early warning indicators, such as rapid asset growth, that may justify more frequent examinations of otherwise eligible institutions.
“As the agencies finalize the interim rule, we encourage them to adopt the enhancements outlined above to further improve transparency and supervisory certainty,” ABA said.
