The U.S. House of Representatives unanimously passed legislation that seeks to modernize the examination process for community banks and credit unions.
The Supervisory Modifications for Appropriate Risk-based Testing Act (SMART Act), sponsored by Rep. William Timmons (R-SC), would create a risk-based approach to supervision for qualifying institutions with $6 billion or less in assets. Under this bill, qualifying institutions would alternate between full-scope and limited-scope examinations, allowing regulators to focus reviews on key risk areas while reducing unnecessary administrative burden.
“Community banks and credit unions are the backbone of many local economies, especially in places like the Upstate,” Timmons said. “These institutions should be focused on serving families, supporting small businesses, and expanding opportunity in their communities, not navigating unnecessary red tape from Washington. The SMART Act takes a commonsense, risk-based approach to supervision that reduces regulatory burden while maintaining strong oversight and accountability.”
Many smaller financial institutions face duplicative and time-consuming examination requirements that place unnecessary strain on their operations. This legislation allows institutions to combine certain examinations, including safety and soundness, consumer compliance, and cybersecurity reviews, into a single examination cycle.
Further, the bill directs regulators to adopt examination best practices aimed at improving efficiency and transparency while preserving regulators’ full authority to conduct additional reviews when warranted.
“By streamlining the examination process for well-managed institutions, this bill allows local lenders from Greenville to Spartanburg to spend more time helping South Carolinians grow businesses, buy homes, and build stronger financial futures,” Timmons said.
Institutions subject to formal enforcement actions or recent changes in control would not qualify for the modified examination process. The SMART Act now heads to the Senate for consideration.