OCC Unveils New Actions to Ease Regulatory Pressure on Community Banks

• OCC introduces new steps to reduce regulatory strain on community banks and strengthen their daily operations.
• Updated guidance aims to sharpen risk-based supervision and improve the effectiveness of oversight.
• OCC seeks input on third-party service provider challenges to help banks stay competitive in changing markets.

The Office of the Comptroller of the Currency (OCC) rolled out a series of supervisory and regulatory changes designed to ease pressure on community banks. The agency said these institutions remain central to lending for small firms and continue to anchor economic activity in towns and cities nationwide.

The new measures expand on earlier direction that sought to align oversight with the actual risks posed by smaller banks. The OCC said the reforms aim to help banks focus more on customers and less on administrative tasks.

According to the agency, small community banks usually operate on tighter margins and employ fewer people compared to larger banks. This automatically means that their compliance burdens are given much more emphasis.

The new approach taken by the OCC focuses on serious financial risks rather than having procedures that may not actually apply to the small loan bank. This was explained by the agency as part of efforts to ensure the small loan banks remain competitive in order to facilitate the creation of jobs.

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OCC Modernizes AML Rules for Lower-Risk Community Banks

The OCC issued individual bulletins addressing updates in the process of Bank Secrecy Act and Anti-Money Laundering examinations. The agency noted that community banks tend to present less risk in money laundering and terrorist financing, and the examination process should take that into consideration.

This updated procedure now indicates that the process should follow methods consistent with the risk level of each individual bank instead of relying on minimum procedures. This will decrease the workload for both the bank and the examination team.

Together with the customized procedures, the OCC also announced the end of its data collection for its money laundering risk system. This means that the industry no longer needs to submit recurring reports to the OCC on something that many small banks already perceived to be unnecessary. According to the agency, its goal in these updates is to increase the efficiency of their BSA/AML supervision without sacrificing the current levels of protection in place.

OCC Expands Reforms on Service Provider Obstacles

Additionally, the OCC also issued a request for information in order to gain better insight into how core service providers or other critical vendors might harm community banks. Of course, many community banks depend on outside companies for their technology, processing, and compliance solutions. This is one area the OCC wants to gain better insight into.

However, the OCC explained that its comprehensive reform initiative is still in process. It is also drafting a rule to lower the community bank leverage ratio. It will also continue to coordinate efforts with other regulators to minimize burdens while fostering economic growth in the communities being served by the aforementioned banks.

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