Jeff Schmid
By Jeff Schmid, CRCM
Want to know the best phrase I’ve heard in my 40-year banking career?
“Be careful of what you ask for, because you just might get it.”
Well, on November 7, 2025, we got it — banks of all sizes got relief from regulatory exams. It came in the form of the FDIC Financial Institution Letter (FIL)-52-2025 that extended the period of compliance exams and Community Reinvestment Act (CRA) evaluations from three years to a five-year cadence. While that may sound like relief, only time will tell.
Over the last decade, community banks have been gravitating toward risk-based management concepts, and this new pattern by the FDIC follows suit with a risk-focused supervisory approach. Smaller banks with lower compliance risk profiles will now see combined compliance and CRA examinations between 66-78 months from the previous exam, while larger banks will benefit from 54-66 months. Lower risk is defined in the FIL as banks with a Consumer Compliance Rating of “1” or “2” and a CRA rating of “Outstanding” or “Satisfactory”. For approximately 116 state-chartered banks in Wisconsin, this change may sound like relief, but when we analyze the overall impact, we start to see a much different picture.
Prior to this modernization, banks of all sizes benefited from the most knowledgeable professionals in the banking industry. While we may not have always agreed with the examiner’s findings, they left our banks stronger and more reputable. Inherently, professional relationships were forged with experienced examiners that guided us through the maze of complex, and often confusing, regulations. With the extension of examination cycles, those relationships will certainly change, if not fade.
For banks with a current Compliance Management System (CMS) rating of “2” or a CRA rating of “Satisfactory”, the chance to demonstrate improved efforts to the Board, or enhance the
community image is now significantly delayed. Report cards that were once timely will now have to wait. Nothing is more frustrating to a compliance officer than not knowing how well the compliance program is working. And think about those systemic issues or patterns of non-compliance that magically appear during an exam. Before this cycle change, a look back period for significant violations went all the way back to the prior exam. What sort of ramifications will now exist if a bank must look back for more than five years? The consequences could be significant.
Finally, there is increased cost and quality assurance to consider — one of the pillars of compliance management is the function of audit. Bank management should expect the cycle of audits to be
more frequent, and most likely will come with increased costs. Due to the delayed time between exams, there will be greater reliance by examiners on independent compliance audits, so the thoroughness by audit professionals will be extremely important. Management will need to determine who will serve them best.
The list of things to consider with the new exam approach doesn’t end here. How we navigate through the change will not necessarily be easy, as we will not know for years if we have been successful in carrying out our CMS program. While we asked for relief, we got more than we bargained for.
To learn how these changes impact your bank, or how our ShareFI services can help you through the next compliance exam, contact Jeff Schmid by email jschmid@fipco.com or call 608-441-1220.
Schmid is the FIPCO senior vice president of compliance and management consulting services.
For more information about FIPCO forms, software, or other products, visit fipco.com, call 800-723-3498, or email fipcosales@fipco.com.
FIPCO is a WBA Gold Associate Member.
