SMART Act of 2025

The Supervisory Modifications for Appropriate Risk-based Testing Act of 2025, or SMART Act of 2025, seeks to alleviate regulatory burdens for specific financial institutions. It applies to well-managed and well-capitalized insured depository institutions and credit unions with consolidated assets of $6 billion or less. For these eligible institutions, the bill mandates that after a full-scope, on-site examination, the subsequent examination conducted by the appropriate federal banking agency or the National Credit Union Administration (NCUA) must be a limited-scope examination. The Act also allows these institutions to request the combination of separate safety and soundness, consumer compliance, and information technology/cybersecurity examinations into a single, concurrent process. This examination relief does not apply if an institution is currently subject to a formal enforcement action or, for depository institutions, if there has been a recent change in control. Federal banking agencies and the NCUA are required to issue rules within 12 months to implement these provisions, balancing regulatory streamlining with maintaining sufficient oversight for safety and soundness. Beyond examination relief, the SMART Act also addresses general examination practices for institutions under $6 billion in assets. It directs federal agencies to ensure examinations are led by experienced examiners and to make efforts to minimize the number of examiners and the time spent on-site. Agencies must also strive to schedule examinations conveniently for the institution and provide advance notice of expected issues. Finally, the bill mandates that federal banking agencies and the NCUA include specific information in their annual reports to Congress. This includes details on their compliance with the new examination relief and practice requirements, as well as aggregate data on examiner experience, staffing levels, and on-site examination duration for smaller institutions.