FDIC Gives Exam Relief to Banks Up to $1 Billion
In welcomed news, the FDIC announced this week that well-run banks with up to $1 billion in assets will be eligible for the agency's streamlined MERIT examination process, easing the safety and soundness exam burden for more community banks. ICBA has continually advocated a tiered approach to regulation and supervision that recognizes the differences between community banks and large banks. Currently the 2-year old MERIT program (Maximum Efficiency, Risk-Focused, Institution-Targeted Examinations) is limited to banks with assets of $250 million or less.
"We commend the FDIC for expanding the MERIT program. Community banks face an enormous regulatory burden and the examination process is part of that burden," said Karen Thomas, ICBA director of regulatory affairs. "This is another positive step in realizing that larger community banks, which pose less risks to the system than big banks, deserve regulatory relief."
To be eligible for the MERIT program, a bank must be well-capitalized and have component and composite ratings of "1" or "2," stable management and effective loan-grading systems. During a MERIT exam, examiners focus on an overall assessment of the bank's risk-management processes, and spend less time on transaction testing. Lower-risk activities are reviewed primarily through discussions with management and by off-site monitoring.
The program is part of the FDIC's ongoing efforts to refine its risk-focused examination process. "Among the program's overall benefits are less examiner time spent on-site in examinations of well-rated banks and more examination resources devoted to institutions that pose higher risks," the FDIC said.
The announcement follows the bank regulators' recent proposal to increase the asset size limit for the streamlined CRA exam from $250 million to $500 million, which would provide additional exam burden relief for community banks.