Building on its stated focus on tailoring bank supervision and regulation to an institution’s risk profile, the Office of the Comptroller of the Currency (OCC) announced on March 3 two final rules intended to reduce regulatory burdens for community banks.
The agency said in a press release that by alleviating costs associated with certain requirements designed for larger, more complex institutions, the rules are designed to allow smaller regulated institutions to focus resources on core functions and to support economic growth.
“Community banks serve critical constituencies and lend to Main Street businesses, that in turn support vibrant local economies,” Comptroller of the Currency Jonathan Gould said in the release. “Unfortunately, over the last couple of decades, regulatory burdens coupled with the proliferation of a one-size-fits-all supervisory framework have cut the number of community banks across our nation in half.”
One of the two rules rescinds the OCC’s Fair Housing Home Loan Data System regulation, which the agency determined to be obsolete, noting that it required “largely duplicative data collection requirements on applications for home loans that applied only to national banks.”
The OCC issued the regulation in 1979 to provide a basis for a more effective fair housing monitoring program for home loans. It also assisted with the implementation of certain parts of the settlement reached in National Urban League et al., v. Office of the Comptroller of the Currency et al, according to the text of the final rule.
The OCC determined the final rule to be “obsolete because it is largely duplicative of and inconsistent with revisions to other legal authorities that require national banks to collect and retain certain information on applications for home loans.” The OCC further reasoned that the rule is obsolete because “agency examiners generally base their fair lending supervisory activities on data collected under other legal authorities that require national banks to collect and maintain information on applications for home loans.”
In a separate rule, the OCC sought to simplify licensing requirements adopted in 2014 for corporate activities and transactions involving community banks by broadening eligibility for expedited or reduced filing procedures. The changes are intended to reduce burden related to corporate activities and transactions by community banks, according to the release.
Among the rule’s provisions is its new definition of a “covered community bank or covered community savings association,” along with corresponding allowances for expedited or reduced filing procedures. Under the rule, these entities are defined as “a national bank or federal savings association that: (1) has less than $30 billion in total assets and is not an affiliate of a depository institution or foreign bank with $30 billion or more in total assets, (2) is ‘well capitalized’ as defined in 12 CFR 5.3, and (3) is not subject to a cease and desist order, a consent order, or a formal written agreement, that requires action to improve the financial condition of the national bank or federal savings association unless otherwise informed in writing by the OCC.”
The American Bankers Association (ABA) issued a statement noting that, while it supports raising the asset threshold for subjecting banks to heightened supervisory standards, the organization would rather see the agency consider rescind the 2014 policy and issue a revised version.
“The OCC has authority to ensure banks are operating in a safe and sound manner and a full rescission of the guidelines aligns with the OCC’s objectives of ensuring banks are focusing on material financial risks by enabling banks to establish institution appropriate risk management frameworks,” the ABA wrote in a comment letter. “If, however, the OCC determines it is necessary and appropriate to retain some aspects of the guidelines, we recommend that the OCC rescind the guidelines and then re-issue them in a revised form as nonbinding, principles-based supervisory guidance, aligning with the OCC’s determination to focus supervisory and enforcement activities on material financial risks.”
Both final rules are scheduled to take effect 30 days following their publication in the Federal Register.