Fed, FDIC, and OCC Raise 18-Month Exam Cycle Threshold to $6 Billion

The Federal Reserve Board, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency on September 10, 2026, issued a joint interim final rule increasing the number of community banks eligible for an 18-month on-site examination cycle, raising the total asset threshold for certain supervised institutions to qualify from $3 billion to $6 billion and extending the exam interval for qualifying small, non-complex firms from 12 months to 18 months.

The rule implements section 903 of the 21st Century ROAD to Housing Act, which became law on July 11, 2026, as Public Law 119-101 and amended section 10(d) of the Federal Deposit Insurance Act. Section 10(d)(1) of the FDI Act generally requires the appropriate federal banking agency to conduct a full-scope, on-site examination of each insured depository institution at least once during each 12-month period. Before the act’s enactment, only qualifying institutions with under $3 billion in total assets were eligible for the 18-month cycle, a level set by section 210 of the Economic Growth, Regulatory Relief, and Consumer Protection Act. The agencies published interim final rules implementing those amendments in August 2018 and final rules in December 2018.

In the joint announcement, the agencies said extending the exam cycle for these small, non-complex firms “appropriately reduces burden, including time and resources spent, for these low-risk institutions.” The extended cycle applies to small banks with relatively low-risk profiles, and the agencies said they will continue the current supervisory practice of offsite monitoring between scheduled exams. By law, eligible institutions must meet certain criteria, including that they are considered well managed and well capitalized.

Eligibility Criteria and Estimated Scope

Under amended section 10(d)(4), an insured depository institution qualifies for the extended cycle if it has total assets of less than $6 billion; is well capitalized; was found at its most recent examination to be well managed and to have a composite condition of “outstanding” or, for an institution with total assets of not more than $200 million, “outstanding” or “good”; is not subject to a formal enforcement proceeding or order by the FDIC or its appropriate federal banking agency; and has 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.

Institutions are evaluated under the Uniform Financial Institutions Rating System, commonly called CAMELS, an acronym drawn from the first letters of its components: capital adequacy, asset quality, management, earnings, liquidity, and sensitivity to market risk. CAMELS composite ratings of 1 and 2 correspond to “outstanding” and “good,” and an institution is considered well managed only if it also received a management component rating of 1 or 2 at its most recent examination. “Well capitalized” is defined by section 38 of the FDI Act under the prompt corrective action framework to mean that an institution significantly exceeds the required minimum level for each relevant capital measure.

The statute also revised section 10(d)(10) of the FDI Act to give each agency discretionary authority to extend the 18-month cycle, by regulation, to qualifying institutions with an “outstanding” or “good” composite condition and total assets up to $6 billion, increased from $3 billion, if the agency determines the amount is consistent with principles of safety and soundness. In the Federal Register notice, the agencies said they determined that raising the maximum asset amount for institutions with a “good” composite condition to less than $6 billion meets that standard.

The agencies estimate the rule will increase the number of banks and savings associations that may be eligible for the extended cycle by approximately 188, of which 95 are supervised by the FDIC, 50 by the OCC, and 43 by the Board, bringing the total number of institutions that may qualify to 4,016. The estimate includes approximately 19 additional U.S. branches and agencies of foreign banks, of which one is supervised by the FDIC, 10 by the OCC, and eight by the Board. The estimates are based on active institutions as of July 11, 2026, for the Board and the FDIC and as of July 30, 2026, for the OCC, using March 31, 2026, data from the Call Report and the FFIEC 002 report of assets and liabilities of U.S. branches and agencies of foreign banks.

The agencies acknowledged that extending the examination cycle creates a longer window during which emerging problems could develop before detection through an on-site examination. They said that for these small, well-rated institutions with relatively simple risk profiles and no outstanding enforcement action or order, the six-month extension should not appreciably increase the risk of financial deterioration or failure, citing the strict eligibility requirements, off-site monitoring activities that often include Call Report-based analyses, and their retained authority to examine qualifying institutions more frequently as necessary or appropriate. In their economic analysis, the agencies said eligible institutions with total assets of $3 billion or more but less than $6 billion will realize cost savings from less frequent examinations, though they noted the potential beneficial effects will vary by institution and are difficult to estimate accurately. Qualifying institutions may incur modest one-time implementation costs, such as updating compliance calendars, policies, and examination preparation schedules.

The rule makes parallel changes raising the threshold from $3 billion to $6 billion for U.S. branches and agencies of foreign banks, consistent with section 7(c)(1)(C) of the International Banking Act of 1978, which subjects federal and state branches and agencies of foreign banks to on-site examination as frequently as national or state banks. Under the Board’s Regulation K as amended, a foreign bank branch or agency with less than $6 billion in total assets qualifies for the 18-month cycle if it received a ROCA rating of 1 or 2 at its most recent examination and meets certain other supervisory criteria.

Approval Process and Rulemaking Mechanics

Board staff requested approval to publish the joint interim final rule in a memo to the Board dated August 21, 2026, recommending adoption alongside the OCC and FDIC and asking for authority to make technical, non-substantive changes before Federal Register publication. The staff memo estimated the rule would increase the number of eligible state member banks by approximately 35 and state-licensed branches and agencies of foreign banks by approximately eight. The Board’s voting record shows the Board approved the interim final rule on September 8, 2026, by unanimous vote: Chairman Warsh, Vice Chair Jefferson, Vice Chair for Supervision Bowman, and Governors Barr, Cook, Powell, and Waller voted in favor, with none against and no abstentions.

The agencies had previously raised the extended-cycle threshold to $250 million in 1997, $500 million in 2007, $1 billion in 2016, and $3 billion in 2018, in each case initially implementing the change as an interim final rule.

The rule amends OCC regulations at 12 CFR 4.6 and 4.7 under Docket ID OCC-2026-0761 and RIN 1557-AF59, Board regulations at 12 CFR 208.64 under Regulation H and 12 CFR 211.26 under Regulation K, and FDIC regulations at 12 CFR 337.12 and 347.211 under RIN 3064-AG33, in each case revising the applicable threshold to less than $6 billion.

The Office of Information and Regulatory Affairs determined the rulemaking is not a significant regulatory action under Executive Order 12866, and the rule is not an Executive Order 14192 regulatory action. The Office of Management and Budget determined it is not a major rule under the Congressional Review Act, and the agencies will submit the rule and appropriate reports to Congress and the Government Accountability Office. The agencies also concluded that Regulatory Flexibility Act analyses do not apply because no notice of proposed rulemaking is being issued, and that no small entities as defined by Small Business Administration rules will be affected by the increased asset thresholds.

The agencies issued the rule without prior notice and comment under the Administrative Procedure Act’s good-cause exception, stating that immediate implementation aligns their regulations with the already-effective statute, reduces regulatory burden on small, well capitalized, and well managed institutions, and provides the certainty needed for institutions and the agencies to begin scheduling examinations under the new cycle. They found the rule exempt from the APA’s 30-day delayed effective date because it recognizes an exemption. The interim final rule is effective immediately upon publication in the Federal Register, and the agencies will accept comments for 30 days.