OCC Provides Incentives for Community Banks with Robust Compliance Programs
By: Travis Nelson, Shareholder, Financial Institutions Regulatory, Litigation, and Enforcement at Polsinelli
New Benefits for Banks with Robust Compliance Programs
The Office of the Comptroller of the Currency (OCC) recently issued OCC Bulletin 2025-24 (Oct. 6, 2025) in an effort to reward OCC-chartered community banks with robust compliance programs. See OCC Bulletin 2025-24 (Oct. 6, 2025), available at: https://www.occ.treas.gov/news-issuances/bulletins/2025/bulletin-2025-24.html#1.
Under current OCC practice and policy, community banks (defined as banks with up to $30 billion in assets) are subject to mandatory examination requirements. Examples of such policies and practices include:
- The Flood Disaster Protection Act;
- Fair lending;
- The Community Reinvestment Act;
- The Servicemembers Civil Relief Act;
- Follow-up on matters requiring attention identified in the most recent examination;
- Follow-up on outstanding violations and enforcement actions;
- Government securities dealer examinations; and
- End-user derivatives and trading activities.
Current OCC policy prescribes specific timing frequency under which national bank examiners must examine for compliance, regardless of whether a given bank’s compliance history and supervisory profile necessarily warrant such frequency.
The Details of the Bulletin
Frequency of Examinations. Under the OCC Bulletin 2025-24, effective Jan. 1, 2026, the agency is delegating to front-line examiners the discretion to determine how often the above examinations must occur.
Reliance on internal bank reports and data. Additionally, the OCC has proposed to allow examiners to rely on a bank’s own reports and data to review for compliance, rather than duplicate the bank’s efforts.
- This will relieve the regulatory burden on OCC-regulated community banks with good practices and performance and demonstrated comprehensive and robust compliance programs, as it will allow OCC examiners to lengthen the intervals between which they will conduct required examinations.
- Where banks are performing poorly, and do not have robust and effective compliance programs, examiners will have the discretion to require more frequent examinations, as they already have under current OCC practice.
Proposed Change to the Definition of a Community Bank
Importantly, the OCC bulletin only applies to “community banks,” which, as noted above, currently is defined to include national banks with assets up to $30 billion. The OCC has recently issued a notice of proposed rulemaking to change the definition of a “covered community bank or covered community savings association,” to define the term as a national bank or federal savings association that:
- Has less than $30 billion in total assets and is not an affiliate of a depository institution or foreign bank with $30 billion or more in total assets;
- Is “well capitalized” as defined in 12 CFR 5.3; and
- Is not subject to a cease and desist order, a consent order, or a formal written agreement, that requires action to improve the financial condition of the national bank or federal savings association unless otherwise informed in writing by the OCC.
See OCC Bulletin 2025-28 (Oct. 6, 2025), available at: https://occ.gov/news-issuances/bulletins/2025/bulletin-2025-28.html.
Looking Forward
Meeting the new definition. Once this round of OCC rulemaking and discretionary pronouncements (bulletins) is over, it is likely that in order for community banks to take advantage of the less frequent examinations posed by OCC Bulletin 2025-24, the institution would need to meet the above-noted revised definition.
Demonstration of a robust compliance program. Moreover, in order to qualify for fewer formal examinations, community banks will need to demonstrate to their examiners that they have robust compliance policies, protocols, and procedures in place that are effectively managing compliance issues such that more frequent examinations are not necessary.
Auditable programs. The new OCC bulletin will also require that institutions have programs in place that are auditable and measurable.
- As noted, one of the goals of the OCC’s new approach is to allow examiners to rely on banks’ own internal records and resources and avoid duplicative and burdensome regulatory reviews.
- According to the new bulletin, OCC examiners “will leverage a community bank’s audit, risk management, reporting and other functions when appropriate,” however in order to do so, “examiners will need to determine the reliability of these functions.”
In other words, in order to take advantage of the new approach, banks will need to ensure that their own compliance programs are comprehensive, robust, and auditable.