Federal regulators are touting their efforts to ease rules governing community lenders.
Most community banks, the Office of the Comptroller of the Currency (OCC) argued in its Monday (May 18) announcement, are well-managed and well-capitalized, conduct business safely and avoid risk.
With that in mind, the regulator said it is restating its “commitment to risk-based supervision” for community banks.
“Community banks are anchors of local economies, providing essential banking services and small business lending that helps power job creation,” said Comptroller of the Currency Jonathan V. Gould.
“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.”
One major change involves the OCC’s examination process for banks. Since Jan. 1 of this year, the OCC has begun tailoring these assessments according to the bank’s size, complexity and risk profile with increased focus on material financial risks.
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“This approach reduces supervisory burden, maintains the value of the federal charter, and preserves banks’ safety and soundness while ensuring regulatory oversight does not distract banks from serving their communities,” the release added.
The OCC has also changed the way these banks measure their capital adequacy with a modified community bank leverage ratio (CBLR) framework, which “simplifies capital calculations, shortens reporting schedules, and provides material regulatory relief while maintaining safety and soundness in the banking system.”
Lastly, the regulator now requires its bank examiners to employ a newly updated resource to simplify bank information technology (BIT) and cybersecurity examinations for community banks, taking a “risk-based approach to supervision” that “improves the effectiveness and efficiency of BIT and cybersecurity examinations.”
The changes come as community banks face a host of different issues, as PYMNTS wrote last month, including the “everyday test.”
A bank account is not truly a primary account until it passes the test, which works like this: a customer’s paycheck lands there, the account pays their bills and uses their debit card, and money flows in and out of it as easily as it would with a mobile wallet.
“An account that fails this test, even one that’s been opened and initially funded, ends up as a dormant placeholder, holding one stale deposit and generating no real engagement,” PYMNTS wrote. “The industry has largely solved digital account opening and even initial funding; what it hasn’t solved is account activation, getting the account to become the one a customer actually uses every day.”
