On April 16, 2025, the Office of the Comptroller of the Currency (OCC) announced that it will merge the supervisory and examination functions for large banks, midsize banks, and community banks into a single supervisory department. This merged department will be led by the current head of Large Bank Supervision, while the former head of midsize and community banks will retire. These organizational changes will go into effect on June 2, 2025.
What does this mean for smaller banks? Traditionally, examiners have looked at institutions of differing size and complexity through a different risk lens. But although there are certain breakpoints in asset size at which banks are subjected to increased requirements, many of these scaling expectations are not explicitly codified in law or regulation.
The OCC intends to blend the resources from its different examination divisions, so it’s likely examiners accustomed to the governance and controls at a $50 billion institution will be evaluating $5 billion banks, or even $500 million banks.
How might that examiner interpret guidance and apply examination procedures to the smaller institution? Is the risk profile of the smaller bank clearly identified and documented in order to support the risk and governance structures in place? Or might there be a gap in expectations – potentially a large gap?
The Independent Community Bankers of America (ICBA) released a statement on this change:
“…It is counterintuitive to consolidate supervisory approaches across institutions with vastly different business models and risk profiles. …Merging supervisory functions threatens to dilute the nuanced oversight that effective community bank supervision requires, jeopardizing the tailored regulatory approach that community banks require and deserve. Community banks are not megabanks. They operate with fundamentally different risk profiles and business models. Effective supervision must be tailored – not standardized – based on the size, scope and complexity of our nation’s financial system.”
Smaller institutions should prepare for a potential shift in expectations. Are you confident your risk and governance programs can stand up under the increased scrutiny?
While the level of controls may look different, the communication of risk and risk acceptance is generally the same across all sizes of institutions. Make sure the documents you present to the regulators are following the most recent frameworks. And if you need help preparing for this transition, meet today with Wolf & Company’s team of risk experts.
