OCC Follows Through on Regulatory Relief for Community Banks

On Oct. 6, 2025, the Office of the Comptroller of the Currency (OCC) issued five bulletins, which, taken together, represent significant and valuable regulatory relief for nationally chartered community banks and thrifts. Three of the bulletins provide guidance/policy changes, while the other two provide notices of proposed rulemaking. Jonathan Gould entered his term as comptroller of the currency with the intent to refocus the agency’s attention on material financial risks. Now the OCC seems to be putting its money where its mouth is.

Examinations
The OCC is required by law to conduct a full-scope, on-site examination of all banks on either a 12- or 18-month exam cycle. Over time, the OCC implemented policies requiring exam activities with greater frequency and expanded scope than those required by statute or regulation. Some examples include fair lending assessments, flood insurance coverage testing and Community Reinvestment Act (CRA) performance evaluations.

In January 2026, the OCC is eliminating mandatory policy-based examination activities for community banks to focus on risk-based supervision. Going forward, examiners can tailor exam scope and frequency to the institution’s size, complexity and risk profile, looking out for material financial risks at the bank. This guidance does not relieve community banks from their obligations to maintain compliance with, and to have systems for monitoring compliance with, all relevant laws and regulations. Rather, it should simplify the requests made by field examiners, shorten the examination process and generally serve to reduce regulatory burden.

Exam Procedures for Community Banks
Many community banks sell retail non-deposit investment products (RNDIP) such as mutual funds, annuities, equities and bonds, either directly or through third parties. When examining a bank’s RNDIP activities, field examiners utilize the RNDIP booklet found in the “Comptroller’s Handbook.” The OCC determined that because community banks generally have more limited RNDIP programs with less risk than larger banks, the complexity and broad scope of the exam procedures in the RNDIP booklet are burdensome and unsuitable.

The OCC will cease utilizing the standards and procedures in the RNDIP booklet when examining community banks and will rely on the core assessment standards found in the Community Bank Supervision booklet of the “Comptroller’s Handbook.” The agency will still have discretion to expand the scope of examination of any community bank’s RNDIP activity based on the bank’s risk profile and unique circumstances.

Clarification for Community Banks
Community banks use models for a variety of bank activities, including underwriting loans, measuring risks and determining capital and loan loss reserve adequacy. Using models for decision-making presents risks of unexpected outcomes resulting from incorrect or misused models. This model risk must be managed, part of which is validation. Current guidance indicates that best practice is for models to undergo validation “at some fixed interval” — interpreted to mean full model validation on an annual basis, without regard to the individual bank’s risk profiles.

The new guidance clarifies that for community banks annual full model validation is not required. It also clarifies that community banks will not be criticized solely for the scope and frequency of their model validation, so long as they act reasonably based on risk exposure, business activities, complexity and extent of their model use.

Rescission of “Fair Housing Home Loan Data System”
The Fair Housing Home Loan Data System — created under 12 Code of Federal Regulation Part 27 — imposes data collection and reporting requirements on national banks that are similar, if not identical to, those already required by the Home Loan Disclosure Act (HMDA). The OCC determined that Part 27 is duplicative of, and inconsistent with, HMDA and imposes additional burdens on national banks that its competitor state-chartered banks do not face; therefore, the OCC proposed Part 27 be rescinded in its entirety.

Community Bank Licensing Amendments
For national banks and federal savings associations of all sizes to engage in certain activities, such as branching, acquisitions and divestitures, they must receive OCC approval. Current licensing regulations provide for expedited applications processing in certain circumstances, and this proposed rulemaking seeks to expand expedited application processes to all nationally chartered community financial institutions. The critical piece of the proposed rule is the proposed definition of covered community bank and covered community savings association. To qualify as covered, institutions must:

1. Have total assets of less than $30 billion.
2. Be well capitalized.
3. Not be subject to a cease and desist, consent order or formal agreement.

In essence, financially sound community banks under $30 billion in assets would get the benefit of any expedited application processing offered by the OCC. This would be welcomed relief for community bankers and advisors alike.