11/19/25

Over the past several years, OBL member banks have consistently raised concerns about examination burdens that felt disconnected from actual risk. Too often, exam cycles were dominated by immaterial findings, ambiguous MRAs, duplicative requests from multiple regulators, or uncertainty around the appropriate use of liquidity tools like FHLB advances. Those frustrations have been heard.

In a significant shift, the Federal Reserve has released a new set of Supervisory Operating Principles that recalibrate how the agency conducts supervision nationwide. This is not a minor procedural update—it is a fundamental rethink of how examiners identify risk, communicate findings, and coordinate with state and federal partners. The new direction, championed by Vice Chair for Supervision Miki Bowman, is aimed squarely at creating a supervisory framework that is clearer, more proportionate, and more closely aligned with the realities facing community banks today.

For Ohio institutions, these changes signal a more predictable, transparent, and right-sized examination environment—one that reflects many of the priorities OBL has long advocated for in Washington and in our engagement with the regulatory agencies.

A More Risk-Focused Approach

The Fed is directing examiners to focus squarely on material financial risks—the issues that actually affect a bank’s safety and soundness. Examiners are instructed not to elevate process or documentation gaps into MRAs or MRIAs unless they are tied to a meaningful risk.

Improved Clarity on MRAs and MRIAs

One of the most impactful changes is a renewed emphasis on specificity:

• MRAs and MRIAs must be written clearly, in plain language, so a “person of ordinary intelligence” can understand what the issue is and what remediation is needed.
• When a bank’s internal audit function is satisfactory, examiners should rely on audit validation rather than duplicating it.
• Once an issue is fixed, examiners are expected to promptly terminate the MRA/MRIA—no holding issues open unnecessarily.

This is excellent news for banks that have struggled with vague or open-ended findings.

Greater Reliance on State Regulators

For bank holding companies and state member banks, the Fed is committing to rely as much as possible on the work of the primary state or federal supervisor. This means:

• Less duplication of examinations,
• Better alignment between state and federal oversight, and
• More efficient use of supervisory resources.

Better Calibration for Smaller Banks

The Fed emphasizes that supervisory intensity must match size and complexity. Community banks should see:

• Fewer horizontal reviews unless clearly justified,
• Reduced burden on immaterial issues, and
• Resources focused where true risks exist.

This reinforces long-standing OBL advocacy that regulation needs to be risk based and right sized for size of institution.

Clear Direction on Liquidity Tools

In a notable change, the Fed states that examiners must not:

• Discourage the use of Federal Home Loan Bank advances, or
• Require pre-positioning at the discount window as a condition for use.