Supervisory Modifications for Appropriate Risk-based Testing Act of 2025; SMART Act of 2025
Summary
The "Supervisory Modifications for Appropriate Risk-based Testing Act of 2025" (SMART Act) 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 safety and soundness, consumer compliance, and IT/cybersecurity. The bill amends the Federal Deposit Insurance Act and the Federal Credit Union Act to implement these changes.
Expected Effects
The SMART Act will likely result in reduced examination frequency and streamlined processes for eligible financial institutions. This could free up resources for these institutions, allowing them to focus on lending and other activities. However, it also introduces potential risks if oversight is reduced too much.
Potential Benefits
- Reduced regulatory burden for smaller, well-managed institutions.
- Potential cost savings for financial institutions due to fewer and combined examinations.
- Increased efficiency in the examination process.
- Flexibility for institutions to request combined examinations.
- Rulemaking requirements to ensure continued safety and soundness.
Most Benefited Areas:
Potential Disadvantages
- Potential for reduced oversight and increased risk-taking by financial institutions.
- Exclusion of institutions under formal enforcement proceedings.
- Complexity in implementing and balancing streamlined examinations with sufficient oversight.
- Possible inconsistencies in application across different Federal banking agencies.
- Risk that material changes in financial condition or operational risk may be missed between examinations.
Constitutional Alignment
The SMART Act falls under Congress's power to regulate commerce, as outlined in Article I, Section 8, Clause 3 of the Constitution (the Commerce Clause). This clause grants Congress the authority to regulate interstate commerce, which includes the regulation of financial institutions. The Act does not appear to infringe upon any specific constitutional rights or limitations.
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).