OCC Issues Two Final Rules To Reduce Regulatory Burden On Community Banks (National Banks And Federal Savings Associations And Banks)

The Office of the Comptroller of the Currency (OCC) recently adopted two final rules designed to reduce regulatory burden on community banks. The rules expand streamlined licensing procedures for qualifying community banks and rescind an outdated mortgage data collection regulation that applied only to national banks.

According to the OCC, the actions are intended to tailor regulatory requirements to the size and complexity of banking organizations and eliminate duplicative or unnecessary compliance obligations while preserving core supervisory and consumer protection safeguards.

OCC Expands Expedited Licensing Procedures

In the first rulemaking, the OCC amended its licensing regulations in 12 C.F.R. Part 5 to expand the availability of expedited review procedures for certain filings made by community banks.

Previously, expedited processing was generally limited to institutions that qualified as “eligible banks” or “eligible savings associations,” typically those that were well capitalized, well managed, and had favorable supervisory ratings. The final rule expands streamlined licensing procedures to a newly defined category of “covered community banks” and “covered community savings associations.”

These categories generally include national banks and federal savings associations with less than $30 billion in total assets that meet alternative specified supervisory criteria (i.e., well capitalized and not subject to a formal enforcement action).

Under the rule, qualifying institutions may use expedited or simplified procedures for a number of routine corporate filings under the OCC's licensing regulations, including:

1. Certain corporate reorganizations and restructuring transactions
2. Non-controlling investments
3. The establishment or modification of operating subsidiaries
4. Other corporate applications governed by the OCC's licensing framework

By expanding eligibility for expedited review, the OCC expects that qualifying community banks will experience reduced paperwork and faster regulatory review timelines when undertaking routine corporate activities.

The rule also clarifies how public comments affect expedited processing. Specifically, a filing generally will remain eligible for expedited review unless a comment raises a significant supervisory, compliance, or Community Reinvestment Act concern.

In adopting the rule, the OCC noted that community banks typically engage in less complex activities than larger banking organizations and therefore present lower supervisory risk in connection with many licensing filings.

OCC Rescinds Fair Housing Home Loan Data System Rule

In a separate rulemaking, the OCC rescinded its Fair Housing Home Loan Data System regulation, previously codified at 12 C.F.R. Part 27.

This regulation, adopted in 1979, required national banks to collect and maintain certain data regarding home loan applications to assist regulators in monitoring compliance with fair housing laws.

The OCC concluded that the regulation had become largely obsolete and duplicative, primarily because of the extensive mortgage data collection requirements imposed under the Home Mortgage Disclosure Act (HMDA) and its implementing regulation, Regulation C.

HMDA already requires lenders to collect and report detailed information regarding mortgage applications, originations, and pricing. Regulators—including the OCC—use this information extensively to monitor fair lending compliance and housing credit availability.

The OCC determined that the additional data collection required under Part 27 no longer provides meaningful supervisory benefits and imposes unnecessary compliance costs. The agency also noted that the rule applied only to national banks, resulting in inconsistent regulatory requirements across different types of financial institutions.

Importantly, the rescission does not diminish regulators' ability to monitor fair lending compliance. Banks remain subject to HMDA reporting requirements and to federal fair lending laws such as the Equal Credit Opportunity Act and the Fair Housing Act.

Implications

The OCC's two rulemakings are consistent with the agency's broader policy objective of tailoring regulation for smaller banking organizations.

For community national banks and federal savings associations, the rules should produce several practical benefits:

1. Reduced compliance costs associated with OCC licensing filings
2. Faster regulatory approvals for routine corporate transactions
3. Elimination of duplicative mortgage data collection requirements

At the same time, the OCC emphasized that the rule changes maintain existing supervisory safeguards and fair lending oversight mechanisms.

Ballard Spahr Observations

These rulemakings reflect the OCC's continuing emphasis on regulatory tailoring for community banks, a policy goal that has been pursued by multiple administrations in recent years.

The expansion of expedited licensing procedures is particularly significant because the OCC's Part 5 regulations govern a wide range of corporate activities. By broadening the institutions eligible for streamlined review, the OCC is likely to reduce delays associated with routine transactions such as internal reorganizations, investments, and subsidiary formations.

The rescission of the Fair Housing Home Loan Data System rule is also notable. Because HMDA reporting has expanded significantly over the past several decades, the additional mortgage data collection required by Part 27 had become largely redundant. Eliminating the rule removes a regulatory requirement that applied only to national banks without reducing the availability of mortgage lending data used for fair lending supervision.

Taken together, the two rules represent relatively modest but meaningful steps toward reducing regulatory burden on community banks while preserving the OCC's core supervisory and consumer protection objectives.

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