• Key insight: The Office of the Comptroller of the Currency is paring down nearly all community bank regulatory measures not required by law, leaving it up to examiners to determine applicable requirements. 
  • Expert quote: “Community banks have an outsized impact on lending and are vital to the strength of the U.S. economy. Today’s actions relieve these banks of regulatory burden and unproductive reporting requirements, so they are better positioned to support their communities and drive economic growth.” — Comptroller of the Currency Jonathan V. Gould.
  • Supporting data: Banks with $30 billion or less in assets are considered community banks by the OCC.

The Office of the Comptroller of the Currency Monday announced new measures to scale back its non-statuatory oversight of small banks, limiting its scope to the most fundamental banking risks and allowing examiners to determine when and to what extent to intervene with the banks they oversee. 

The agency also requested public comment on two proposed rules: one to repeal the Fair Housing Home Loan Data System regulation, which the agency says is a “largely duplicative data collection requirement,” as well as a separate proposal to allow community banks to be eligible for fast-track licensing approvals.

“The OCC will continue to prioritize reforms targeted to community banks ahead of broader reforms for the industry,” the OCC release stated. “Ongoing work includes adjusting the community bank leverage ratio framework and a simplified strategic plan process for community banks to comply with the Community Reinvestment Act.”

Beginning Jan. 1, 2026, the OCC will eliminate policy-based exam requirements not mandated by law, instead giving examiners and regulators a free hand in determining what kinds of examination to conduct on community banks. Examiners will instead use a fully risk-based approach, tailoring exam frequency and scope to each bank’s size, complexity and risk profile. The OCC says the move will rely on examiner discretion and simplify the burden on small firms.

“When appropriate for a community bank’s activities and risk profile, examiners will conduct appropriate examination activities. This may include streamlined testing methods, more limited sampling, and reliance on bank-provided reports as appropriate for a community bank’s activities and size, complexity, and risk profile,” the bulletin stated. “As needed, examiners will also conduct follow up activities for matters requiring attention, violations of law, and enforcement actions at appropriate times.”

In a separate move, the agency also said it will stop using its complex exam procedures for community banks that sell investment products like mutual funds or annuities, arguing the old process was too complex for smaller institutions. The change means community banks will no longer be examined under the detailed Retail Nondeposit Investment Products, or RNDIP, handbook, which lays out strict risk management and compliance procedures for selling uninsured investment products. Community banks, which the OCC defines as those with up to $30 billion in assets, will instead be reviewed under more general supervisory guidelines. 

In a third bulletin the agency clarified that smaller banks no longer need to conduct yearly reviews of the financial models they use to manage risk, price loans or set capital levels. The agency said banks can decide how often to validate their models based on size, complexity, and risk exposure, and promised not to penalize institutions that take a lighter-touch approach.

“The OCC will not provide negative supervisory feedback to a bank solely for the frequency or scope of the model validation that the bank reasonably determined to perform based on the bank’s risk exposures, its business activities, and the complexity and extent of its model use,” the bulletin stated. “To ensure that flexibility for model risk management is maintained going forward, the OCC will emphasize that message internally with its community bank examination teams.”

The agency separately proposed a rule to scrap a requirement that banks collect and report fair housing home loan data, saying the regulation is duplicative and obsolete. The OCC claims the elimination of the requirement will not come at the expense of its ability to monitor housing discrimination. 

“The OCC has undertaken a review of [the rule] and determined that the regulation is obsolete and largely duplicative of and inconsistent with other legal authorities that require national banks to collect and retain certain information on applications for home loans,” the proposed rule announcement stated. “Moreover, [the rule] imposes asymmetrical data collection requirements on national banks compared with their other depository institution counterparts, and the data collected have limited utility.”

The agency proposed yet another rule loosening licensing requirements for community banks. Under the proposed rule, community banks would be eligible for faster approvals on mergers, reorganizations and other corporate actions requiring agency approval. Under the plan, qualifying community banks with clean regulatory records would have automatic access to the truncated filings procedures for applications, allowing small lenders to compete better within the industry according to OCC.

A top banking trade group applauded the move Monday, with American Bankers Association President Rob Nichols calling it common sense. 

“The guidance and proposed rulemakings will help ensure that individual institutions are subject to supervision that is appropriate to the risks presented by their products and services and that regulators keep their focus on material financial risks that directly affect the safety and soundness of the nation’s banks and our financial system,” Nichols wrote in a statement. “We appreciate Comptroller Gould’s commonsense approach to regulation and supervision, which will help America’s community banks continue to meet the needs of their customers and communities both now and in the future.”