Have you recently noticed a slight change in the tone of some recent regulatory pronouncements? We have. The positive nature of these changes in tone isn’t a figment of your imagination. Based on persistent and concerted efforts from numerous states banking association trade groups, federal bank regulators appear to have been listening and are now beginning to recognize that community banks indeed need meaningful relief from the increasing regulatory burdens weighing upon them.
Two recent issuances bear mentioning. The first is the change in the asset threshold of bank’s eligible for the 18-month safety and soundness examination cycle compared with the current 12-month cycle. The FDIC, Federal Reserve and OCC have collectively increased the asset threshold from $500 million to $1.0 billion for this eligibility, effectively lengthening the examination cycle for more than 600 community banks nationwide. If you’re in this grouping, your institution still needs to maintain a 1 or 2 CAMELS rating and be Well-Capitalized, but this is a long-awaited and much welcomed positive development for the affected community banks. This new requirement should be implemented in late 2016 or early 2017.
The second change relates to an opportunity from the CFPB to apply to the agency for a designation under integrated mortgage disclosure rules (TRID) to request additional geographic areas be designated as “rural” and thus be eligible for broader exemptions from new TRID mortgage requirements. This change is being driven by the Helping Expand Lending Practices in Rural Communities (HELP) Act passed by Congress in December 2015. Applications under this process are open through December 2017, although other shorter timing requirements may apply. This opportunity is one many rural-focused banks have strived for since the TRID process began, so it is no doubt welcomed news in many PKM-client quarters.
These two positive regulatory changes don’t by themselves remove a meaningful amount of the total regulatory burden faced by community banks. But they do represent clear steps in the right direction and should embolden the industry to continue to press for common sense regulatory burden relief.