On April 3, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision (collectively, the Banking Agencies) issued for public comment proposed interim rules expanding the range of small institutions eligible for an extended 18-month on-site examination cycle. The proposed interim rules allow well-capitalized and well-managed banks and savings associations with up to $500 million in total assets and a composite CAMELS rating of 1 or 2 to qualify for an 18-month (versus the current 12-month) on-site examination cycle. Notably, until passage of the Financial Services Regulatory Relief Act of 2006, only institutions with less than $250 million in total assets could qualify for an extended 18-month on-site examination cycle.

According to the accompanying announcement, the Banking Agencies believe that this change will allow them to “better focus their supervisory resources on those institutions that may present capital, managerial, or other issues of supervisory concern, while concomitantly reducing the regulatory burden on small, well-capitalized and well-managed institutions.” Comment will be sought for 30 days after publication in the Federal Register.