bank regulations Archives - The Free Financial Advisor

18-month bank examination cycle — Federal banking regulators have raised the asset threshold from $3 billion to $6 billion for certain qualifying institutions to use an 18-month on-site examination cycle instead of the standard 12-month schedule. dennizn/Shutterstock

Some community banks may now go six additional months between regularly scheduled federal on-site examinations after regulators doubled the asset threshold for institutions eligible for an extended examination cycle.

The Office of the Comptroller of the Currency, Federal Reserve Board and Federal Deposit Insurance Corporation have issued an interim final rule raising the threshold from $3 billion to $6 billion in total assets.

The change took effect September 14, 2026, and implements a provision of the 21st Century ROAD to Housing Act.

For bank customers, the important distinction is that the rule doesn’t eliminate federal oversight or automatically give every bank below $6 billion an 18-month examination schedule. The longer cycle is intended for qualifying institutions with relatively low-risk profiles that meet additional supervisory requirements.

What Changed for Community Banks

Federal law generally requires insured depository institutions to receive a full-scope, on-site examination at least once every 12 months.

Certain smaller institutions that satisfy additional requirements, however, can qualify for an examination every 18 months instead.

Until this change, the relevant asset ceiling was $3 billion. The new rule raises that threshold to less than $6 billion, potentially allowing more community banks to use the extended schedule.

According to the OCC, approximately 50 additional OCC-regulated institutions are expected to become eligible for the 18-month examination cycle because of the higher threshold.

The Federal Reserve, FDIC and OCC said extending the examination cycle can reduce the time and resources low-risk institutions devote to the examination process.

A Bank Doesn’t Qualify Based on Size Alone

A bank having $5 billion in assets doesn’t automatically mean federal examiners will visit only once every 18 months.

Federal regulators emphasize that institutions must satisfy qualifying criteria for the extended examination schedule. Those requirements include being considered well capitalized and well managed.

The rule is designed for smaller institutions with relatively low-risk profiles rather than giving every bank under the new asset ceiling an automatic six-month extension.

Regulators also aren’t going completely hands-off during the longer interval.

The agencies said they will continue their existing practice of off-site monitoring between scheduled examinations for institutions using the extended cycle.

That distinction matters for depositors who might see the phrase “fewer bank examinations” and assume federal oversight is disappearing. The change affects the normal schedule for qualifying full-scope on-site examinations; it doesn’t mean regulators stop monitoring a bank for 18 months.

Why Regulators Say the Change Is Needed

Federal regulators describe the rule as a way to reduce unnecessary regulatory burden on community banks that have already demonstrated stronger financial and managerial characteristics.

A full bank examination can require significant staff time and resources as examiners evaluate areas including financial condition, management, risk controls and compliance with applicable laws.

Moving a qualifying institution from a 12-month to an 18-month cycle gives it another six months between those regularly scheduled examinations.

The agencies argue that this is appropriate for smaller, well-managed and well-capitalized institutions with lower-risk profiles.

OCC officials have also framed the change as part of a broader effort to tailor supervision to the size, complexity and risk of community banks rather than applying the same regulatory burden to every institution.

U.S. Operations of Some Foreign Banks Are Included Too

The rule isn’t limited to domestic community banks.

The OCC, Federal Reserve and FDIC are also making corresponding changes to regulations governing the examination cycles of qualifying U.S. branches and agencies of foreign banks.

Those changes are being made consistent with requirements under the International Banking Act of 1978.

As with domestic institutions, meeting the asset threshold alone doesn’t necessarily establish eligibility for the longer examination cycle. The applicable regulatory requirements still have to be satisfied.

What Does This Mean for Bank Customers?

For the typical checking or savings account customer, there is no immediate action to take.

The rule doesn’t change the balance in an account, the interest rate a bank pays or the basic way customers access their money.

It also doesn’t change the standard FDIC deposit insurance amount. At an FDIC-insured bank, deposits are generally automatically insured to at least $250,000 per depositor, per insured bank, for each account ownership category.

Instead, this is primarily a change in how frequently certain qualifying banks undergo their regularly scheduled full-scope federal on-site examinations.

Customers concerned about the financial condition of a bank can still verify whether an institution is FDIC insured and review publicly available information about it rather than attempting to determine safety based solely on whether its normal examination cycle is 12 or 18 months.

The Rule Is Already in Effect, but Regulators Want Comments

The agencies issued the change as an interim final rule, which means it took effect upon publication while regulators are still accepting public comments.

The Federal Reserve identifies the proposal as Docket No. R-1898, while OCC materials identify Docket ID OCC-2026-0761.

Comments are being accepted for 30 days following publication in the Federal Register.

The immediate takeaway for consumers is fairly limited: some additional community banks that satisfy federal safety, management and other qualifying standards can now move from annual on-site examinations to an 18-month schedule.

For the banks themselves, however, regulators say those additional six months can reduce examination-related time and costs while off-site supervision continues between scheduled exams.

What to Read Next

What Actually Happens to the Money in Your Bank Account When You Die?

Why Banks Sometimes Close Accounts Without Warning

You Can Pay the IRS Directly From Your Bank Account for Free—No Registration Required

Amanda Blankenship

Amanda Blankenship is the Chief Editor for District Media. With a BA in journalism from Wingate University, she frequently writes for a handful of websites and loves to share her own personal finance story with others. When she isn’t typing away at her desk, she enjoys spending time with her daughter, son, husband, and dog. During her free time, you’re likely to find her with her nose in a book, hiking, or playing RPG video games.

Major Banks Continue Generating Billions From Overdraft Fees — Image source: shutterstock.com

The overdraft fee refuses to die.

In an era of sleek banking apps, real-time alerts, and promises of financial empowerment, major banks still collect billions of dollars each year from customers who spend more than they have in their accounts. That number has fallen from its peak a decade ago, but it remains enormous, and it continues to raise serious questions about how the banking system treats everyday account holders.

If you assume overdraft fees faded into obscurity after years of public pressure and regulatory scrutiny, the numbers tell a very different story.

Millions In Fees

Overdraft fees once ranked among the most reliable revenue streams for large banks, and even after reforms and public backlash, they still deliver substantial income.

Institutions such as JPMorgan Chase, Bank of America, Wells Fargo, and Citibank still report hundreds of millions of dollars in overdraft-related revenue each year. Some have scaled back the practice by eliminating certain fees or reducing the number of times they charge customers per day. Others have introduced grace periods or low-balance alerts, which signal progress but do not erase the underlying business model.

Banks argue that overdraft services provide value. They frame the service as short-term liquidity that prevents declined payments, embarrassment at checkout counters, and late fees from merchants. That argument resonates with some customers, yet critics counter that the structure of overdraft fees often hits those with the least financial cushion the hardest. The tension between convenience and cost defines the debate, and it explains why the revenue persists even as public scrutiny intensifies.

Who Pays the Price

Overdraft fees do not spread evenly across all account holders. Research shows that a small percentage of customers account for a large share of overdraft revenue. Many of those customers carry lower account balances and experience volatile cash flow, which means they face a higher risk of dipping below zero.

Banks typically charge a flat fee, often around $30 to $35, for each overdraft transaction. When multiple transactions clear on the same day, those fees can stack quickly. Some banks once reordered transactions from largest to smallest, which increased the number of overdraft charges, but regulatory pressure and lawsuits pushed many institutions to abandon that practice.

Even with changes, the basic math still stings. A $15 purchase that triggers a $35 fee creates an effective short-term borrowing cost that dwarfs most credit card interest rates. Customers who incur repeated overdrafts can rack up hundreds of dollars in fees in a matter of weeks. That dynamic fuels criticism from consumer advocates who argue that overdraft programs function less like a safety net and more like a high-cost credit product attached to a checking account.

Regulatory Pressure and Public Backlash

Over the past several years, regulators have stepped up their focus on overdraft practices. The Consumer Financial Protection Bureau has scrutinized what it calls “junk fees” in banking, and it has urged institutions to rein in aggressive overdraft policies. Some lawmakers have proposed caps on overdraft fees or limits on how often banks can charge them.

Some recent changes by banks trimmed overall fee revenue across the industry, yet they did not eliminate overdraft programs. Banks still rely on them, and they still defend them as optional services that customers must opt into for debit card and ATM transactions. Federal rules require banks to obtain consent before enrolling customers in certain types of overdraft coverage, which means you can decline the service. Many people never revisit that decision after opening an account, even though it can shape their financial life in a very real way.

The Psychology Behind the Swipe

Overdraft fees persist not only because banks design them into account agreements, but also because human behavior makes them profitable. Most people do not track their checking account balance down to the dollar in real time. Life moves quickly, bills arrive unpredictably, and subscriptions renew quietly in the background.

Debit cards create a sense of immediacy without the visible friction of handing over cash. When a transaction goes through despite insufficient funds, the immediate relief can overshadow the fee that arrives later. Banks often notify customers after the fact, which means the decision has already occurred.

You can take back some control with a few deliberate steps. Set up low-balance alerts through your banking app and choose a threshold that reflects your real spending patterns, not a random number. Link your checking account to a savings account for overdraft protection if your bank offers it at low or no cost. Keep a small buffer in your checking account, even if it feels inefficient, because that cushion can save you from multiple $35 hits that wipe out any interest you might earn elsewhere.

A Business Model Under the Microscope

Critics argue that overdraft fees reveal a deeper issue within the banking system. Large banks market checking accounts as foundational financial tools, yet they attach fee structures that disproportionately affect customers with unstable incomes. When a relatively small group of account holders generates a large share of overdraft revenue, the optics raise uncomfortable questions about fairness.

Banks counter that customers choose these services and that fee income supports the cost of maintaining branch networks, digital infrastructure, and fraud protection. They point to competition from online banks and credit unions, many of which have reduced or eliminated overdraft fees altogether. The market, they argue, gives consumers options.

Both sides hold pieces of the truth. Consumers do have choices, but switching banks requires time, effort, and trust. Not everyone feels comfortable moving their direct deposit, automatic bill payments, and savings into a new institution. That inertia helps preserve the status quo, even when better alternatives exist.

The Real Cost of Convenience

Overdraft services promise convenience, and in certain moments, they deliver it. They can prevent a declined rent payment or a utility shutoff, which carries consequences that extend beyond a single fee. At the same time, convenience rarely comes free, and overdraft fees illustrate that tradeoff in stark numbers.

When major banks continue generating billions from overdraft fees, they signal that demand for short-term liquidity remains strong and that many households operate with thin margins. That reality reflects broader economic pressures, including rising living costs and income volatility.

If major banks still earn billions from overdraft fees each year, what steps will you take to make sure none of that money comes from your account? Tell us about it in the comments below.

Federal Regulators Double Bank Asset Threshold for 18-Month Examination Cycle to $6 Billion