OCC Bulletin 2019-3 | January 17, 2019

Expanded Examination Cycle Eligibility: Final Rule

To

Chief Executive Officers of All National Banks, Federal Savings Associations, and Federal Branches and Agencies; Department and Division Heads; All Examining Personnel; and Other Interested Parties

Summary

The Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation have published an interagency final rule that adopts without change the August 29, 2018, interim final rule amending the regulations governing eligibility for the 18-month on-site examination cycle. Pursuant to the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA), the interim final rule made qualifying 1- and 2-rated national banks, federal savings associations, and federal branches and agencies (collectively, banks) with less than $3 billion in total assets eligible for an 18-month (rather than a 12-month) examination cycle.

Note for Community Banks

Qualifying 1- and 2-rated community banks with less than $3 billion in total assets are eligible for an 18-month examination cycle.

Highlights

Qualifying banks with less than $3 billion in total assets are eligible for an 18-month examination cycle.
The OCC retains the authority to examine a bank on-site more frequently, as the agency deems necessary or appropriate.

Background

Before the interim final rule, 18-month examination cycles were available only to qualifying 1- and 2-rated banks with less than $1 billion in total assets. Through the interim final rule, the OCC revised 12 CFR 4 to raise the threshold for qualifying 1- and 2-rated banks with less than $3 billion in total assets, consistent with the EGRRCPA and section 7(c)(1)(C) of the International Banking Act of 1978. Other qualification criteria remained the same.

Specifically, the interim final rule provided that to qualify for the extended 18-month examination cycle, 1- and 2-rated banks with less than $3 billion in total assets must be well capitalized, not subject to a formal enforcement proceeding or order from a federal banking agency, and not have experienced a change of control in the preceding 12-month period. Additionally, a national bank or federal savings association must have a management rating of 1 or 2 to qualify.

Under the interim final rule, the OCC retained the authority to continue the 12-month on-site examination schedule for an institution or otherwise adopt a more frequent schedule than every 18 months if the agency determines it is necessary and appropriate.

The final rule adopts each of these provisions without change.

Further Information

Please contact Deborah Katz, Assistant Director; Melissa Lisenbee, Senior Attorney; or Christopher Rafferty, Attorney, Chief Counsel’s Office, at (202) 649-5490; or Enice Thomas, Senior Advisor to the Senior Deputy Comptroller for Midsize and Community Bank Supervision, at (202) 649-5420.

Bao Nguyen
Principal Deputy Chief Counsel