Regulatory Relief for Community Banks Continues

Written by Jennifer Theimer | Dec 2, 2025 1:30:00 PM

Over the past week, the FDIC finalized significant updates to FDICIA Part 363, primarily affecting annual audit requirements, internal control assessments, and audit committee standards. Alongside this final rule, federal regulators have also proposed lowering the Community Bank Leverage Ratio (CBLR) from 9% to 8%.

Final Rule: FDICIA Part 363

Key Changes:

Audit Relief: Banks with assets under $1 billion are no longer required to undergo annual independent audits under Part 363.
ICFR Exemptions: Institutions under $5 billion are exempt from management and auditor attestations on internal controls over financial reporting.
Governance Simplification: Audit committee composition requirements are eased for banks under $1 billion, and expertise requirements now apply only to institutions above $5 billion.

Requirement	Old Threshold	New Threshold
Annual audit/reporting	$500 million	$1 billion
Management assessment of ICFR	$1 billion	$5 billion
Auditor opinion on ICFR	$1 billion	$5 billion
Audit committee – all outside directors	$500 million	$1 billion
Audit committee members independent	$1 billion	Unchanged
Audit committee members -banking/financial expertise	$3 billion	$5 billion
Director compensation threshold for independence	$100,000	$120,000

Effective Date: January 1, 2026. Banks do not need to comply with Part 363 requirements as of December 31, 2025 if they will be exempt under the new thresholds on January 1, 2026.

Planning Considerations

Assess how these changes affect your institution and inform your board.
Coordinate with external auditors to plan for the December 31, 2025 audit and renegotiate terms as applicable.
Update audit committee policies and charters.
Review internal controls and reporting processes and make changes when they make sense. Be careful if nearing new thresholds.
Reallocate resources for ICFR programs based on revised requirements.

Proposed Rule: Lowering Capital Requirements

The CBLR (Community Bank Leverage Ratio) is an optional, simplified capital framework designed for community banks with assets below $10 billion. Instead of calculating complex risk-based capital ratios, qualifying banks can opt for this straightforward leverage ratio. The proposed rule issued last week would reduce the requirement from 9% to 8%. Lowering this requirement would allow qualifying institutions to free up capital that could then be used to lend more to their communities.

The proposed rule is open for comment for 60 days after publication in the Federal Register.

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