The Office of the Comptroller of the Currency (OCC) has launched several reforms to reduce the supervisory and regulatory burdens for community banks.
The OCC has also taken actions to reaffirm its commitment to risk-based supervision and tailor its supervisory activities for community banks.
“Community banks are anchors of local economies, providing essential banking services and small business lending that helps power job creation,” Comptroller of the Currency Jonathan Gould said. “The OCC has taken a range of actions to better tailor its supervision and provide meaningful reforms to community banks so they can continue to drive economic development in their local communities and the broader national economy.”
Specifically, the OCC issued guidance that removed requirements for examination activities set by OCC policy – like examination activities concerning Community Reinvestment Act (CRA) performance, fair lending, end-user derivatives, and trading. Instead, the guidance provided that the OCC will tailor its examination of a community bank’s specific activities in light of the bank’s size, complexity, and risk profile with heightened focus on material financial risks. This approach reduces supervisory burden, maintains the value of the federal charter, and preserves banks’ safety and soundness while ensuring regulatory oversight.
This guidance was effective on Jan. 1. To implement the guidance, the OCC updated its policies and processes for CRA examination scheduling to provide discretion with respect to the examination frequency. Going forward, the OCC will schedule a community bank’s CRA examination by considering the bank’s size, risk profile, and complexity.
Also, the OCC finalized a rule modifying the community bank leverage ratio (CBLR) framework. The framework simplifies capital calculations, shortens reporting schedules, and provides regulatory relief while maintaining safety and soundness in the banking system.
In addition, the OCC updated the model risk management guidance for OCC-supervised institutions to clarify that model risk management practices should be risk-based, tailored, and commensurate with a banking organization’s size, complexity, and extent of model use. The guidance does not set enforceable standards or requirements. Models used by community banks are generally excluded from this guidance, as they are typically subject to internal risk management and governance practices appropriate for their size and risk profile.
Finally, the OCC requires its bank examiners to use a newly updated resource to narrow the scope and simplify bank information technology (BIT) and cybersecurity examinations in community banks. The OCC’s approach to assess and improve cybersecurity preparedness reinforces a risk-based approach to supervision.