07/16/25

In a series of unanimous decisions, the FDIC Board voted to roll back multiple policy changes enacted during the Biden administration, with significant implications for industrial banks, regulatory thresholds, the supervisory appeals process, and the implementation of the Community Reinvestment Act (CRA). The Board also introduced a proposal aimed at streamlining the regulatory approval process for new bank branches and office relocations.

Audit and Reporting Thresholds: Proposed Increases

The FDIC’s rule proposes inflation-indexed adjustments to several Part 363 thresholds, which govern when banks must adhere to enhanced audit, reporting, and governance requirements. These changes are aimed at reducing regulatory burden on smaller institutions unintentionally captured by outdated standards. Importantly the FDIC staff commented this is the first of several proposals that will be implemented in conjunction with the other banking agencies to start increasing and indexing all regulatory thresholds.

Detailed Breakdown of Thresholds to be Adjusted & Indexed

1. Part 363: Annual Independent Audits and Reporting Requirements

$500 Million Threshold

• Current Requirement: Institutions with ≥ $500 million in total assets must:

• Prepare annual audited financial statements.
• Submit a management report (including internal controls over financial reporting).

• Proposed Change: This threshold will be indexed annually, most likely using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) or another inflation-linked measure.
• Impact: Prevents smaller banks from tripping this threshold simply due to inflationary growth.

$1 Billion Threshold

• Current Requirement: Institutions with ≥ $1 billion in total assets must:
  • Include an independent auditor’s attestation on the effectiveness of internal control over financial reporting in the annual audit.
• Proposed Change: Indexed annually to adjust for economic changes.
• Impact: Helps mid-sized banks avoid significant cost increases from new audit requirements due solely to nominal asset growth.

2. Brokered Deposit and Interest Rate Restrictions

$1 Billion Threshold for “Well-Capitalized” Determinations (Part 337.6)

• This asset threshold is used in part to determine applicability of restrictions on brokered deposits and interest rates.
• Proposed Change: Index this threshold so that smaller banks don’t unintentionally face limitations because of inflation.

3. Community Bank and Community Reinvestment Act (CRA) Thresholds

Note: While not under Part 363, these thresholds are referenced for harmonization.

CRA Small Bank Definition

• Currently ~ $1.564 billion (2025 indexed level).
• Defines which banks are considered “small banks” for CRA examination purposes, meaning fewer requirements.
• Already indexed annually — the proposal aligns FDIC’s approach for Part 363 thresholds with this model.

CRA Intermediate Small Bank Definition

• Current Range: $502 million – $1.564 billion.
• Already indexed annually.
• The FDIC’s proposal uses this precedent to justify indexing other supervisory thresholds.

4. Assessment Pricing Thresholds

Some FDIC insurance premium pricing tiers depend on asset size thresholds. While not explicitly adjusted in this rulemaking, the FDIC acknowledges that indexing audit/reporting thresholds could eventually inform broader regulatory consistency, including pricing models.

Restoration of Independent Supervisory Appeals

The FDIC also advanced a proposal to reinstate the independent Office of Supervisory Appeals (OSA), which had been dissolved in 2022. The proposed change would eliminate the Supervision Appeals Review Committee (SARC), a body long criticized by industry stakeholders — including the American Bankers Association — as insufficiently independent and ineffective at resolving disputes over supervisory findings. If finalized, the return of the OSA would offer banks a more credible and impartial process to contest examination results and enforcement actions.

CRA Reform Reversal

In coordination with the Federal Reserve and the Office of the Comptroller of the Currency, the FDIC Board voted to propose rescinding the 2023 final CRA rule and reverting to the previous CRA framework. The 2023 rule was designed to modernize CRA compliance, but critics argued it imposed excessive complexity and reporting burdens on community banks. The decision to roll back the rule reflects a broader effort by the FDIC and other regulators to recalibrate CRA obligations in a way that better supports local lending and economic development without overregulating smaller institutions.

Proposal to Streamline Branch Approvals

Finally, the FDIC introduced proposed rulemaking that would simplify and accelerate the process for approving new bank branches and office relocations. Key changes include:

• Shortened approval timelines: For applications subject to expedited processing, the review period would be reduced from 21 business days to just three.
• Elimination of outdated requirements: Applicants would no longer be required to publish newspaper notices or submit extensive informational filings. Instead, a statement of intent and the proposed location would suffice.
• Reduced regulatory burden: These changes are designed to cut red tape and speed up access to new markets for banks looking to expand.

Industrial Bank Oversight Revisited

Among the most notable actions, the FDIC withdrew a proposed rule issued earlier this year that would have imposed new regulatory requirements on the parent companies of industrial banks and industrial loan companies. Rather than finalize the rule, the Board will instead issue a request for information (RFI), seeking broader public input on the agency’s oversight approach for these institutions. The move signals a potential shift away from stricter supervisory expectations and reflects a willingness to reassess the regulatory framework from the ground up.

The proposals are subject to public comment and additional interagency coordination, but they signal a significant shift in the regulatory tone. The OBL will plan to comment on the regulatory proposals and push for additional regulatory reforms.