On October 14, 2026, the Federal Reserve issued Supervision and Regulation Letter 26-8, updating eligibility criteria for state member banks and U.S. branches and agencies of foreign banks to qualify for an extended 18-month examination cycle rather than the standard 12-month cycle. The guidance follows amendments to the Federal Deposit Insurance Act under the 21st Century ROAD to Housing Act (previously discussed here), which increased the asset threshold for eligible institutions from $3 billion to $6 billion.
The guidance implements changes adopted through a September 14, 2026, interim final rule amending Regulations H and K. The rule, issued jointly with the OCC and FDIC, became effective September 14, 2026. Specifically, the updated guidance:
- Raises the asset eligibility threshold. State member banks and qualifying U.S. branches and agencies of foreign banks with less than $6 billion in total assets may now qualify for an 18-month examination cycle.
- Maintains supervisory requirements for state member banks. Eligible institutions must be well capitalized, maintain CAMELS management and composite ratings of "1" or "2," have no outstanding formal enforcement proceeding or order from the Federal Reserve or FDIC, and satisfy applicable change-of-control restrictions.
- Establishes eligibility criteria for foreign banking organizations. U.S. branches and agencies must maintain a ROCA composite rating of "1" or "2," satisfy applicable capital adequacy or asset and liquidity requirements, and meet enforcement and change-of-control conditions.
- Preserves supervisory discretion. The Federal Reserve may conduct examinations more frequently when warranted, including where supervisory ratings, financial deterioration, or other risk factors justify additional oversight.
The guidance also directs Reserve Banks to conduct Bank Secrecy Act and anti-money laundering compliance program reviews every 18 months for institutions examined under the extended cycle. Reserve Banks should also update examination coordination agreements with state banking regulators as appropriate.
Putting It Into Practice: The expanded examination cycle reflects a broader federal regulatory shift toward risk-based supervision and reduced examination burdens for qualifying institutions (previously discussed here and here). Although the changes may reduce examination frequency for certain banks, the Federal Reserve retains authority to conduct additional examinations based on supervisory concerns. Banks approaching the new threshold should assess their eligibility, coordinate examination schedules with regulators, and maintain appropriate compliance and risk management controls between examinations.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
[View Source]
