H.R. 4437: Supervisory Modifications for Appropriate Risk-based Testing Act of 2025

The Supervisory Modifications for Appropriate Risk-based Testing Act of 2025, also known as the SMART Act of 2025, aims to reduce regulatory burdens on certain financial institutions that are deemed well-managed and well-capitalized. Here are the main points of the bill:

1. Definition of Eligible Institutions

The bill applies to insured depository institutions (like banks) and credit unions with consolidated assets of $6 billion or less that have demonstrated sound management practices and adequate capital levels. Specifically, these institutions must have been found to be well-managed in their most recent examinations.

2. Examination Relief for Banks

For eligible insured depository institutions:

• Alternating Limited-Scope Examinations: After completing a full examination by a federal banking agency, the subsequent examination will be a limited-scope examination, allowing for a lighter review focused on key areas.
• Combined Examinations: If the institution is subject to various examinations (such as safety, consumer compliance, and cybersecurity), it can request to combine two or three of these examinations to streamline the process.

However, this relief does not apply if:

• The institution is under a formal enforcement proceeding or order.
• Ownership changes have occurred since the most recent full examination.

3. Examination Relief for Credit Unions

Similar provisions will apply to eligible insured credit unions:

• Alternating Limited-Scope Examinations: After a comprehensive examination, the next checkup will also be limited in scope.
• Combined Examinations: They can also request a combination of various examinations to lessen the regulatory burden.

Similar exceptions to this examination relief are in place for credit unions as well, relating to enforcement proceedings and changes in ownership.

4. Rulemaking Requirements

The relevant federal banking agencies and the National Credit Union Administration must establish new procedures and guidelines to implement the provisions of this act within 12 months of enactment. These rules should ensure the examinations maintain an appropriate balance between flexibility for institutions and necessary oversight for safety and compliance.

5. Regulatory Oversight

While the act aims to streamline examinations, it does not limit the ability of federal banking agencies and the National Credit Union Administration to conduct additional reviews if deemed necessary to ensure compliance with laws and regulations or to assess the safety and soundness of the institutions.

Relevant Companies

None found.