OCC Restructures Bank Supervision: Why Community Banks Must Pay Attention
When the Office of the Comptroller of the Currency (OCC) announced on April 16 that it was overhauling its bank supervision structure, most Community Banks didn’t blink. But they should.
This is more than an internal reshuffling. By merging its Midsize and Community Bank Supervision and Large Bank Supervision units into a single “Bank Supervision and Examination” line of business, the OCC has blurred the lines between how large and small institutions are examined.
It’s a move that reflects the growing complexity of risks facing all institutions, but it also raises a red flag for Community Banks:
You may now be evaluated by teams trained to examine the largest banks in the country — with the same expectations, the same metrics, and the same scrutiny.
Why This Restructure Matters to Community Banks
Here’s what the OCC’s change could really mean in practice:
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Large-bank examiners are now in the room. The OCC says this merger will allow seamless “sharing of expertise and resources” across all banks. That sounds good in theory but in practice, it means your examiner team could include individuals steeped in large bank practices, bringing with them very different expectations.
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Community Banks may lose their “small bank lens.” The Community Bank supervision model was designed around proportional expectations and practical exam scopes. The new model risks eroding that principle as supervisory lines blur.
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Higher expectations could sneak in unannounced. You may not see a formal change to your exam cycle or rating framework, but expect questions that go deeper on risk controls, vendor oversight, and board governance.
What’s Driving This Change?
The OCC framed the restructure as a way to “address today’s challenges,” “align similar functions,” and create new career paths. But we believe it’s also a reflection of how quickly the line between large and small bank risks is vanishing—especially in areas like third-party risk, fintech partnerships, and cybersecurity.
For CBs, the message is clear:
The days of limited-scope exams and leniency for resource constraints may be numbered.
🧭 Up Next: In Part 2 of this series, we’ll explore whether the OCC is pulling away from the FDIC and FRB in how it supervises Community Banks, and what that means for banks juggling more than one federal regulator.