Shearman & Sterling LLP | Financial Regulatory Developments Focus | <span ><font >US Federal Reserve Board, OCC and FDIC Expand 18-Month Examination Cycle for Small Banks and Branches and Agencies of Foreign Banks</font ></span >
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  • US Federal Reserve Board, OCC and FDIC Expand 18-Month Examination Cycle for Small Banks and Branches and Agencies of Foreign Banks
    08/23/2018

    The U.S. Board of Governors of the Federal Reserve System, U.S. Office of the Comptroller of the Currency and U.S. Federal Deposit Insurance Corporation jointly issued an interim final rule and request for comment to expand the number of insured depository institutions and U.S. branches and agencies of foreign banks eligible for an 18-month on-site examination cycle.  The interim final rule implements Section 210 of the Economic Growth, Regulatory Relief, and Consumer Protection Act, which amends Section 10(d) of the Federal Deposit Insurance Act.  Under the interim final rule, the Federal Reserve Board, OCC and FDIC are permitted to examine qualifying insured depository institutions with less than $3 billion in total assets on an 18-month cycle.  Consistent with Section 7(c)(1)(C) of the International Banking Act, which provides that a federal or state branch or agency of a foreign bank be subject to the same on-site examination frequency as a national or state bank, the interim final rule also makes parallel changes with respect to the regulations governing the on-site examination cycle for U.S. branches and agencies of foreign banks. In order to qualify for the extended examination cycle, the institution must (i) have less than $3 billion in total assets; (ii) be well capitalized; (iii) have been found at its most recent examination to be well managed, with a composite condition of “outstanding” or “good”; (iv) not be subject to a formal enforcement proceeding or order by the FDIC or the institution’s respective federal banking regulatory agency; and (v) have not undergone a change in control during the previous 12-month period in which a full-scope, on-site examination otherwise would have been required.  The interim final rule will take effect upon its publication in the Federal Register, with comments due within 60 days of publication.

    View full text of the interim final rule.