Supervisory Modifications for Appropriate Risk-based Testing Act of 2025; SMART Act of 2025
Summary
The SMART Act of 2025 aims to reduce the regulatory burden on well-managed and well-capitalized financial institutions with consolidated assets of $6 billion or less. It introduces alternating limited-scope examinations and combined examinations for insured depository institutions and credit unions. The bill also mandates rulemaking by federal banking agencies and the National Credit Union Administration (NCUA) to implement these changes, while ensuring continued safety, soundness, and compliance.
Expected Effects
The act will likely lead to reduced compliance costs for smaller financial institutions. It may also free up resources for lending and investment. However, there is a potential risk of reduced oversight, which could impact financial stability if not properly managed.
Potential Benefits
- Reduced regulatory burden for well-managed and well-capitalized institutions.
- Streamlined examination processes, potentially saving time and resources.
- Flexibility for institutions to combine examinations.
- Potential for increased lending and investment due to reduced compliance costs.
- Mandated reports to Congress on examination practices, promoting transparency.
Most Benefited Areas:
Potential Disadvantages
- Potential for reduced oversight and increased risk-taking by institutions.
- Exceptions for institutions under enforcement actions or with recent changes in control.
- Rulemaking required, which could delay implementation and create uncertainty.
- The definition of 'well managed' relies on past examinations, which may not reflect current conditions.
- Could create a two-tiered system where smaller institutions have less stringent oversight than larger ones.
Constitutional Alignment
The SMART Act aligns with the Commerce Clause (Article I, Section 8, Clause 3) by regulating financial institutions that engage in interstate commerce. It also aligns with Congress's power to coin money and regulate the value thereof (Article I, Section 8, Clause 5) by ensuring the stability of financial institutions. The Act does not appear to infringe upon any individual liberties or rights protected by the Bill of Rights.
Impact Assessment: Things You Care About ⓘ
This action has been evaluated across 19 key areas that matter to you. Scores range from 1 (highly disadvantageous) to 5 (highly beneficial).