Is the OCC Breaking from the Pack on Community Bank Supervision?

When the OCC announced last week that it would combine its Community, Midsize, and Large Bank Supervision functions into one centralized division, many Community Banks asked the same question:

Are the other regulators doing this too?

The short answer is: No.

The longer answer is:  Not yet, and maybe not at all.

That divergence could create new challenges for Community Banks operating in a multi-regulator environment or trying to benchmark their compliance posture against evolving supervisory expectations.

Comparing Regulatory Supervision Models

Here’s how the three primary federal banking regulators stack up as of today:

OCC:  Centralized Oversight

New model:  Unified Bank Supervision and Examination unit.

• Intended benefit — Shared expertise across all bank sizes, talent flexibility.

• Practical impact — Community Banks may face more technical, large-bank-style exams even without formal changes in rating methodology.

FDIC:  Regional and Risk-Based

• Retains a strong regional structure, with supervision aligned to geographic divisions.

• Exam teams generally scaled to bank size and complexity.

• Community Banks still see a proportionate approach although recent enforcement trends suggest rising scrutiny in areas like third-party risk and internal controls.

Federal Reserve:  Tiered and Segmented

• Community Bank supervision remains distinct from large bank oversight, with separate examination teams and procedures.

• Focus remains on tailored exams although Governor Bowman has expressed concern that overly complex expectations are creeping in.

Why Divergence Matters for Community Banks

If you’re a Community Bank regulated solely by the OCC, you’re already in the new model.

If you’re regulated by the FDIC , FRB or more than one agency, you may find yourself stuck in the middle of a policy split.

Here’s why that’s a problem:

• Inconsistent examiner expectations:  Different agency examiners may prioritize different risks, interpret the same control differently, or ask for documentation in entirely different formats.

• Mixed messaging for management and boards:  When OCC expectations ratchet up but FDIC feedback stays quiet, it’s hard to know which signal to follow.

• Compliance whiplash:  One year you pass your exam, the next year you’re flagged for the same practices because a different regulator sees things differently.

In short, when regulators don’t move in sync, Community Banks pay the price.

A Strategic Takeaway for Community Banks

Until the FDIC or FRB adopts a similar structural change, Community Banks should calibrate their programs to meet the most demanding interpretation across all regulators. In most cases right now, that means preparing for the OCC’s more centralized, expertise-driven exam process.

The real shift happens between the lines — in who sits on your exam team, what questions they ask, and how they interpret your answers.

📌  Up Next:  Our final post in this series will lay out 3 concrete steps Community Banks should take now to prepare for the OCC’s new supervisory model.

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