Supervisory Modifications for Appropriate Risk-Based Testing Act of 2025
Floor Speech
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Mr. HILL of Arkansas. Mr. Speaker, I move to suspend the rules and pass the bill (H.R. 4437) to reduce the regulatory burden on certain well managed and well capitalized financial institutions, and for other purposes, as amended.
The Clerk read the title of the bill.
The text of the bill is as follows: H.R. 4437
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, SECTION 1. SHORT TITLE.
This Act may be cited as the ``Supervisory Modifications for Appropriate Risk-based Testing Act of 2025'' or the ``SMART Act of 2025''. SEC. 2. EXAMINATION RELIEF FOR CERTAIN WELL MANAGED AND WELL CAPITALIZED FINANCIAL INSTITUTIONS.
(a) Insured Depository Institutions.--Section 10(d) of the Federal Deposit Insurance Act (12 U.S.C. 1820(d)) is amended by adding at the end the following:
``(11) Examination relief for certain well managed and well capitalized insured depository institutions.--
``(A) In general.--The following shall apply to a well managed and well capitalized insured depository institution with $6,000,000,000 or less in consolidated assets:
``(i) Alternating limited-scope examinations.--After an insured depository institution receives a full-scope, on-site examination from the appropriate Federal banking agency, the next examination of the insured depository institution by the appropriate Federal banking agency shall be a limited-scope examination, as determined by the appropriate Federal banking agency.
``(ii) Combined examinations.--If an insured depository institution is otherwise subject to separate safety and soundness examinations, consumer compliance examinations, and information technology and cybersecurity examinations, the appropriate Federal banking agency shall, upon request of the insured depository institution, combine two or three such examinations, as specified by the insured depository institution, and carry them out at the same time.
``(B) Exception.--Subparagraph (A) shall not apply to an insured depository institution if--
``(i) the insured depository institution is currently subject to a formal enforcement proceeding or order by the Corporation or the appropriate Federal banking agency; or
``(ii) a person acquired control of the insured depository institution since the most recent full-scope, on-site examination of the insured depository institution from the appropriate Federal banking agency.
``(C) Rulemaking.--Not later than 12 months after the date of enactment of this paragraph, the Federal banking agencies shall issue rules to carry out subparagraph (A), including, with respect to an insured depository institution described under subparagraph (A), to--
``(i) establish procedures for the limited-scope examinations described in subparagraph (A)(i);
``(ii) establish procedures for reviewing insured depository institutions that--
``(I) experience material changes in financial condition or operational risk profile between scheduled examinations; or
``(II) have failed to comply with Federal or State banking laws and regulations; and
``(iii) balance the goals of streamlining the examination cycle for individual insured depository institutions and reducing unnecessary regulatory burdens while maintaining sufficient oversight to ensure the continued safety and soundness of the insured depository institutions and compliance with all applicable laws and regulations.
``(D) Rule of construction.--Nothing in this paragraph may be construed to limit the authority of a Federal banking agency to conduct off-site monitoring, targeted reviews, or additional full-scope, on-site examinations of an insured depository institution if the Federal banking agency determines such monitoring, reviews, or examinations are necessary to ensure safety and soundness or compliance with applicable laws.
``(E) Definitions.--In this paragraph:
``(i) Consumer compliance examination.--The term `consumer compliance examination' means an examination to assess compliance with the requirements of Federal consumer financial law (as such term is defined in section 1002 of the Consumer Financial Protection Act of 2010).
``(ii) Well capitalized.--The term `well capitalized' has the meaning given that term in section 38(b).
``(iii) Well managed.--With respect to an insured depository institution, the term `well managed' means that, when the institution was most recently examined by the appropriate Federal banking agency, the institution was found to be well managed, and the institution's composite condition was found to be satisfactory or outstanding.''.
(b) Insured Credit Unions.--Section 204 of the Federal Credit Union Act (12 U.S.C. 1784) is amended by adding at the end the following:
``(h) Examination Relief for Certain Well Managed and Well Capitalized Insured Credit Unions.--
``(1) In general.--The following shall apply to a well managed and well capitalized insured credit union with $6,000,000,000 or less in consolidated assets:
``(A) Alternating limited-scope examinations.--After an insured credit union receives a full-scope, on-site examination from the National Credit Union Administration, the next examination of the insured credit union by the National Credit Union Administration shall be a limited-scope examination, as determined by the National Credit Union Administration.
``(B) Combined examinations.--If an insured credit union is otherwise subject to separate safety and soundness examinations, consumer compliance examinations, and information technology and cybersecurity examinations, the National Credit Union Administration shall, upon request of the insured credit union, combine two or three such examinations, as specified by the insured credit union, and carry them out at the same time.
``(2) Exception.--Paragraph (1) shall not apply to an insured credit union if the insured credit union is currently subject to a formal enforcement proceeding or order by the National Credit Union Administration.
``(3) Rulemaking.--Not later than 12 months after the date of enactment of this subsection, the National Credit Union Administration shall issue rules to carry out paragraph (1), including, with respect to an insured credit union described under paragraph (1), to--
``(A) establish procedures for the limited-scope examinations described in paragraph (1)(A);
``(B) establish procedures for reviewing insured credit unions that--
``(i) experience material changes in financial condition or operational risk profile between scheduled examinations; or
``(ii) have failed to comply with Federal or State banking laws and regulations; and
``(C) balance the goals of streamlining the examination cycle for individual insured credit unions and reducing unnecessary regulatory burdens while maintaining sufficient oversight to ensure the continued safety and soundness of the insured credit unions and compliance with all applicable laws and regulations.
``(4) Rule of construction.--Nothing in this subsection may be construed to limit the authority of the National Credit Union Administration to conduct off-site monitoring, targeted reviews, or additional full-scope, on-site examinations of an insured credit union if the National Credit Union Administration determines such monitoring, reviews, or examinations are necessary to ensure safety and soundness or compliance with applicable laws.
``(5) Definitions.--In this paragraph:
``(A) Consumer compliance examination.--The term `consumer compliance examination' means an examination to assess compliance with the requirements of Federal consumer financial law (as such term is defined in section 1002 of the Consumer Financial Protection Act of 2010).
``(B) Well capitalized.--The term `well capitalized' has the meaning given that term in section 216(c).
``(C) Well managed.--With respect to an insured credit union, the term `well managed' means that, when the credit union was most recently examined by the National Credit Union Administration, the credit union was found to be well managed, and the credit union's composite condition was found to be satisfactory or outstanding.''. SEC. 3. EXAMINATION PRACTICES.
(a) Insured Depository Institutions.--Section 10(d) of the Federal Deposit Insurance Act (12 U.S.C. 1820(d)), as amended by section 2(a), is further amended by adding at the end the following:
``(12) Examination practices.--With respect to on-site examination of an insured depository institution with less than $6,000,000,000 in total assets, the appropriate Federal banking agency shall--
``(A) ensure the examination is led by, to the maximum extent practicable, an examiner with significant experience as an examiner;
``(B) make every effort, to the maximum extent practicable, to minimize the number of examiners utilized and the amount of time spent at the institution to carry out the examination;
``(C) make every effort, to the maximum extent practicable, to schedule the examination at a time that is convenient for the institution; and
``(D) to the maximum extent practicable, give the institution advance notice of issues expected to be covered in the examination.
``(13) Report.--In its annual report to Congress, each Federal banking agency shall include--
``(A) information on how the agency is complying with paragraphs (11) and (12); and
``(B) aggregate data summarizing the agency's examination practices with respect to insured depository institutions with less than $6,000,000,000 in total assets, including--
``(i) the average experience of examiners, including the average number of years of examiner experience of those who lead on-site examinations;
``(ii) the average number of examiners utilized; and
``(iii) the average amount of time the agency spends visiting such institutions for on-site examinations.''.
(b) Insured Credit Unions.--Section 204 of the Federal Credit Union Act (12 U.S.C. 1784), as amended by section 2(b), is further amended by adding at the end the following:
``(i) Examination Practices.--With respect to on-site examination of an insured credit union with less than $6,000,000,000 in total assets, the National Credit Union Administration shall--
``(1) ensure the examination is led by, to the maximum extent practicable, an examiner with significant experience as an examiner;
``(2) make every effort, to the maximum extent practicable, to minimize the number of examiners utilized and the amount of time spent at the credit union to carry out the examination;
``(3) make every effort, to the maximum extent practicable, to schedule the examination at a time that is convenient for the credit union; and
``(4) to the maximum extent practicable, give the credit union advance notice of issues expected to be covered in the examination.
``(j) Report.--In its annual report to Congress, the National Credit Union Administration shall include--
``(1) information on how the Administration is complying with subsections (h) and (i); and
``(2) aggregate data summarizing the Administration's examination practices with respect to insured credit unions with less than $6,000,000,000 in total assets, including--
``(A) the average experience of examiners, including the average number of years of examiner experience of those who lead on-site examinations;
``(B) the average number of examiners utilized; and
``(C) the average amount of time the Administration spends visiting such credit unions for on-site examinations.''.
Mr. Speaker, I rise today in enthusiastic support of my friend from South Carolina (Mr. Timmons) and his SMART Act.
Community banks and credit unions play a vital role in all of our local communities across our Nation, often serving as the primary source of credit, particularly in rural and underserved communities.
These institutions support small businesses and small farms and help hardworking Americans achieve homeownership and long-term financial stability.
Too often, well-managed institutions are burdened by duplicative and outdated regulatory requirements. These unnecessary burdens divert time, staff, and resources away from lending and supporting their local economies and toward a check-the-box compliance process that does not make the financial system any safer or any sounder.
The SMART Act offers a practical, commonsense solution by streamlining and simplifying limited-scope exams for smaller, well- capitalized, and well-managed institutions, while fully preserving the safety and soundness standards.
This targeted supervisory relief reduces unnecessary burden, eliminates duplicative reviews, and frees community banks to focus on lending and those goals of serving their customers.
Regulators should recognize that financial institutions with a strong track record should not be subject to the same regulatory scrutiny as institutions that are under financial stress, poorly managed, or quite large and complex.
Furthermore, the SMART Act makes further improvements to bank and credit union examinations, encouraging Federal regulators to improve examination practices by assigning experienced examiners, minimizing unnecessary onsite disruptions, and ensuring exams are conducted in a more efficient and predictable manner.
Washington should not create unnecessary burdens that make it even harder for small public or privately held community banks and their credit union competitors to try to compete and serve their Main Street customer base.
The SMART Act is a practical, bipartisan step that preserves the strength of community institutions, keeps regulators focused on the areas of greatest risk, and supports a healthier, more balanced financial system for all Americans.
Mr. Speaker, I urge my colleagues to support the SMART Act, and I reserve the balance of my time.
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Mr. HILL of Arkansas. Mr. Speaker, I include in the Record the CBO estimate for the bill. EFFECTS ON DIRECT SPENDING AND REVENUES OF LEGISLATION -------------------------------------------------------------------------------------------------------------------------------------------------------- Additional Effect on direct information on direct Link to published Bill Number Title spending Effect on revenues spending and revenue estimates effects -------------------------------------------------------------------------------------------------------------------------------------------------------- H.R. 4437.......................... SMART Act, as amended. Reduce by at least Increase by at least Would decrease net N/A $500K. $500K. deficits by at least tens of millions. -------------------------------------------------------------------------------------------------------------------------------------------------------- Source: Congressional Budget Office.
Mr. Speaker, I thank the gentleman from Illinois (Mr. Foster), who is the ranking member of our Subcommittee on Financial Institutions, working hand in glove with my friend from South Carolina (Mr. Timmons) who addressed the House. Together, they show the best of the Congress. They are focused on where the rubber hits the road for most all the customers in America, and that is our community banks.
I have said many times on this House floor that if you are concerned about housing, you ought to be concerned about our Main Street community banks because they, Mr. Speaker, deliver. Six out of 10 home construction loans are made by those banks under $10 billion.
Today, we are here to talk about providing some examination coordination. Examinations that give very targeted relief to the very best--well-capitalized, well-managed, unblemished, not connected to a merger or acquisition activity--community banks to let them better coordinate their routine exam process.
Mr. Speaker, I have worked at banks of that size, and I know the confusion of multiple exams that are uncoordinated between the agencies and come like waves, one after another, from which there is no relief. The same small compliance group dedicated in that bank under $6 billion is avalanched by these requests from the FDIC, the Federal Reserve, the OCC, the State Bank Department, the NASD, now FINRA for a broker dealer, a trust exam, an IT exam. There is no end to it.
This kind of coordination is so valuable to these often entrepreneurially owned Main Street banks under $6 billion as described by the gentleman from Illinois (Mr. Foster) and the gentleman from South Carolina (Mr. Timmons). It is a powerful change, Mr. Speaker, because probably 8 out of 10 banks in the country under $6 billion would meet that test. I am sure there are between 3,000 and 4,000 banks that meet the definitions in this bill. That is real regulatory relief for real bankers who are serving real customers on Main Street in America, and that is what we want. That leads to better outcomes, faster economic growth, and more revenues for our States and for our society.
Mr. Speaker, I encourage a strong ``yes'' vote on the work by Congressmen Timmons and Foster, and I yield back the balance of my time of my time.
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