Joint Letter to Agencies re: Eligibility for the 18-month Examination Cycle

Dear Sir or Madam:

The American Bankers Association(ABA) appreciates the opportunity to provide comments onthe joint interim final rule issued by the Office of the Comptroller of the Currency, the FederalReserve Board of Governors, and the Federal Deposit Insurance Corporation (Agencies)expanding eligibility for the 18-month examination cycle. The Agencies’ rule implementsSection 210 of the Economic Growth, Regulatory Relief, and Consumer Protection Act,(EGRRCPA) enacted on May 24, 2018.

Current law generally requires the Agencies to conduct full scope, on-site examinations ofinsured depository institutions (IDIs) no less frequently than every 12-months. However, theAgencies are legally permitted to conduct examinations no less than every 18-months for smallIDIs that meet five eligibility requirements. The EGRRCPA increased asset-based ceilingsfound in two of these eligibility requirements.

First, the EGRRCPA increased the asset threshold for banks eligible for the 18-month examcycle for well managed banks whose composite condition was found to be outstanding when theinstitution was most recently examined. Previously, the 18-month exam cycle for such banks wasonly available to institutions with less than $1 billion in total assets. EGRRCPA expanded thisasset threshold to apply to institutions with less than $3 billion in total assets.

Second, EGRRCPA gave the Agencies discretion to increase the asset ceiling for institutionsfound to be well managed with a composite condition found to be good. This threshold hasmoved from where it was currently set at $1 billion or less in total assets to $3 billion or less intotal assets.

ABA supports the Agencies’ interim final rule implementing EGRRCPA consistent withCongressional intent to provide the fullest available relief to community banks. Further, ABAagrees that the current off-site monitoring activities of the Agencies and continued discretion toexamine IDIs more frequently, as necessary, make this change consistent with the principles ofsafety and soundness.

Recognizing that the Agencies plan their examinations well in advance, there may be transitionalissues that stem from EGRRCPA’s enactment. Banks previously on a 12-month exam cycle yetnewly eligible for the 18-month exam cycle may face uncertainty about their upcoming exams.ABA encourages the Agencies to adjust their current scheduling of exams as much as they areable to provide newly eligible institutions the option to extend their examination cycle in thistransitional period.

ABA appreciates the work of the Agencies to give full effect to the relief measures enacted in theEGRRCPA and is encouraged by the decisions of the Agencies to use their discretion in a wayconsistent with providing better tailored supervision to our nation’s community banks. Shouldyou have any questions, please do not hesitate to contact the undersigned at skern@aba.com or(202) 663-5253.

Sincerely,
Shaun Kern
Senior Counsel
Office of Regulatory Policy