On December 2, 2020, the Office of the Comptroller of the Currency (OCC), together with the Board of Governors of the Federal Reserve System (Board) and the Federal Deposit Insurance Corporation (collectively, the agencies), issued an interim final rule to temporarily mitigate transition costs related to the coronavirus (also known as COVID-19) pandemic on community banking organizations, including national banks and federal savings associations, with less than $10 billion in total assets as of December 31, 2019. The rule allows these organizations to use asset data as of December 31, 2019, to determine the applicability of various regulatory asset thresholds during calendar years 2020 and 2021. The OCC also intends to provide similar flexibility to community banking organizations crossing other thresholds in OCC regulations that are not specifically addressed in this rule.
Note for Community Banks
The rule applies to community banks with total assets of less than $10 billion as of December 31, 2019.
Community banking organizations have played an instrumental role in the nation’s financial response to COVID-19, and many have experienced significant balance-sheet growth as a result of the pandemic and the policy response to it. Much of this growth, particularly that related to participation in the Paycheck Protection Program (PPP), is expected to be temporary. Community banking organizations are subject to a wide range of statutory requirements, regulations, and reporting requirements predicated on their risk profile and asset size. Due to their response to COVID-19, many community banking organizations have been, or may soon be, pushed over an asset threshold that could subject them to additional regulation or to additional reporting requirements. This rule gives community banking organizations more time to either reduce their balance sheets by shedding temporary growth or prepare for higher regulatory and reporting standards.
To provide this regulatory burden relief, the rule temporarily changes, for a number of asset-based regulatory thresholds, the date as of when a community banking organization measures its assets for the purpose of determining whether it exceeds a threshold. Specifically, the rule will permit community banking organizations, through December 31, 2021, to determine the applicability of certain asset-based regulatory thresholds using asset data as of December 31, 2019, if the organization’s assets as of that date were less than its assets on the date as of which the applicability of a given threshold would normally be determined. This means that asset growth in 2020 or 2021 will not trigger new regulatory requirements for these community banking organizations until January 1, 2022, at the earliest. This temporary regulatory burden relief reflects that much of the asset growth since the start of the COVID-19 pandemic, especially growth related to PPP lending, is generally expected to be temporary in nature and therefore likely does not reflect changes in community banking organizations’ risk profiles.
Specifically, the rule provides OCC-supervised institutions with temporary relief from the asset thresholds in the following rules:
- The $10 billion threshold in the Community Bank Leverage Ratio at 12 CFR 3.12;
- The $10 billion threshold in the Board’s debit card interchange fee regulation at 12 CFR 235.5;
- The $5 billion threshold for eligibility for reduced reporting requirements for the call report at 12 CFR 52.2; and
- The $3 billion threshold for eligibility for an 18-month examination cycle at 12 CFR 4.6(b) and 4.7(b).
Please contact Kevin Korzeniewski, Counsel, or Alison MacDonald, Special Counsel, Chief Counsel’s Office, at (202) 649-5490.
Jonathan V. Gould
Senior Deputy Comptroller and Chief Counsel
- “Temporary Asset Thresholds” (PDF)