The FDIC board on Thursday approved a joint interim final rule that raised the asset size of banks eligible for 18-month exam cycles to $1 billion. The previous threshold for 1-rated banks was $500 million.
According to a statement from FDIC Chairman Martin J. Gruenberg, recent statutory changes permitted three federal banking agencies – the Federal Reserve, the OCC and the FDIC – to expand the availability of longer exam cycles. The statute also authorized the agencies to extend the change to 2-rated institutions that have assets between $200 million and $1 billion and that meet other qualifying criteria, if the agencies determine that the higher threshold would be consistent with safety and soundness.
"The banking agencies supported these changes to the Federal Deposit Insurance Act as a reasonable step to take as part of regulatory burden relief efforts," Gruenberg said. "I am pleased Congress acted swiftly to adopt the changes and that the agencies have been able to move expeditiously to implement them through this interim final rule. I would like to thank staff at all the agencies for their work to bring this case forward."
Credit union trade associations called on the NCUA to follow suit and join other financial regulators in providing similar regulatory relief for credit unions.
"Given the recent FDIC and OCC actions to allow certain banks an 18-month exam cycle, NAFCU again calls upon the NCUA to lengthen the exam cycle for healthy, well-run credit unions," NAFCU President/CEO Dan Berger said in a statement. "Credit unions did not cause the financial crisis, are in extremely sound shape as an industry, and do not need the additional burden of more frequent exams."
Berger added that the longer exam cycle would allow the NCUA to reserve resources for credit unions that require more oversight. He urged the regulator to approve this "much-needed relief for credit unions as soon as possible."
Earlier on Thursday, NCUA Chairman Debbie Matz indicated her support for the lengthening of the exam cycle in her comments at the NCUA board meeting. She said that the NCUA is "not locked into an annual exam cycle every year" and added that the agency may consider moving back to an 18-month exam cycle for credit unions that pose less risk to the share insurance fund.
"For at least the third time, Chairman Matz has said publicly that the agency is taking steps to move to a less frequent exam cycle," CUNA Chief Advocacy Officer Ryan Donovan told CU Times. "These are welcomed words and we look forward to the agency putting those words into actions that make the examination process fairer, more efficient and less frequent for credit unions."
Donovan added, "With the FDIC moving to a less frequent cycle for banks, there is no reason that the NCUA shouldn't do the same. We continue to urge the agency to move with haste to turn the chairman's words into results for credit unions."
NCUA Board Member Mark McWatters, who spoke out in favor of extending the exam cycle during the board's November meeting, said he still supports that move.
"The recent action by the FDIC demonstrates how misguided the NCUA has been (i) in not investigating the possibility of examining a subset of credit unions every 18 months, (ii) in insisting that every credit union with assets over $250 million must be examined every 12 months, (iii) in not working to rely upon SSA examinations for NCUA insurance purposes and (iv) in defining small entity by reference to $100 million of assets," he told CU Times.
The Independent Community Bankers of America applauded the move. ICBA President/CEO Camden Fine said the decision will allow more community bankers "to redirect their resources from excessive regulatory burdens to serving their local communities." An additional 617 banking institutions will qualify for the extended exam cycle, according to Fine.
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