HR-4437-119
Motion to reconsider laid on the table Agreed to without objection.
Sponsored by William Timmons (R-SC)
What it does
The SMART Act of 2025 would require federal regulators to conduct limited-scope examinations — rather than full-scope examinations — in the year immediately following a full-scope examination for depository institutions and credit unions that are well-capitalized, well-managed, and hold $6 billion or less in assets. It would also require regulators, upon request, to combine separate compliance examinations (such as safety and soundness, and information technology exams) into a single simultaneous review. Exceptions apply to recently acquired institutions and those under formal enforcement actions or orders.
Who benefits
Small and mid-sized community banks and credit unions (those with $6 billion or less in assets) that are in good regulatory standing — they would face less frequent full-scope examinations and fewer separate exam visits. Their customers, who may benefit if reduced compliance costs translate to lower fees or better rates. Small business borrowers and rural communities that rely heavily on community banks and credit unions for credit access. Bank and credit union staff who manage examination logistics. Shareholders and members of qualifying institutions who may see reduced administrative overhead.
Who is hurt
Federal bank examiners and regulatory agencies (FDIC, OCC, NCUA, Federal Reserve) whose workload and scheduling flexibility would be constrained by the new mandatory procedures. Consumers and depositors at qualifying institutions, if reduced examination frequency allows problems to go undetected longer. Competing larger financial institutions that already face more intensive oversight and do not receive the same relief. Whistleblowers or community advocates who rely on frequent examinations to surface misconduct at smaller institutions.
Supporters argue
Supporters argue that well-capitalized, well-managed small institutions with clean examination records pose lower systemic risk and should not face the same examination burden as troubled or larger banks. They contend that redundant, overlapping exam visits impose significant administrative costs on community banks and credit unions — costs that are ultimately passed on to customers — and that streamlining oversight frees examiner resources to focus on higher-risk institutions where scrutiny is most needed.
Opponents argue
Opponents argue that reducing examination frequency for small institutions — even well-managed ones — creates gaps in oversight that can allow problems to compound before regulators detect them, pointing to historical cases where community bank failures followed periods of clean examination records. They contend that combining multiple exam types into a single visit may reduce the depth and independence of each review, and that the $6 billion asset threshold is broad enough to cover institutions whose failure could still cause meaningful harm to local depositors and borrowers.
Constitutional context
No significant constitutional tension is present. Congress has broad authority to regulate the examination of federally chartered and insured depository institutions under the Commerce Clause (Art. I, §8, cl. 3) and the Necessary and Proper Clause (Art. I, §8, cl. 18). This bill modifies existing statutory examination procedures rather than creating new agency authority, so it is unlikely to raise major questions doctrine concerns under West Virginia v. EPA (2022) or post-Chevron scrutiny under Loper Bright v. Raimondo (2024).
Checks and balances
Congress sets the examination requirements; federal banking regulators (FDIC, OCC, NCUA, and the Federal Reserve) retain discretion to determine the scope of limited examinations and to apply exceptions for institutions under enforcement actions, preserving a regulatory check on the reduced-scrutiny framework.
Historical precedent
The Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 similarly reduced examination frequency and regulatory burdens for smaller banks and credit unions, including extending the exam cycle from 12 to 18 months for qualifying institutions with under $3 billion in assets.