Key highlights of the proposed changes
The FDIC’s proposal is part of a broader, multiphase initiative to modernize its regulatory thresholds in light of inflation. This move is designed to provide a more durable and equitable regulatory framework, especially for community banks and midsized institutions that may otherwise cross compliance thresholds due to inflation rather than operational growth.
Specifically, the proposed rule would:
- Adjust existing thresholds — such as those tied to total asset size — for compliance with audit and reporting requirements under Part 363.
- Introduce an indexing mechanism to automatically update these thresholds every two years based on cumulative inflation (or sooner if inflation exceeds 8% in a single year).
- Preserve the intent of regulatory thresholds in real terms, ensuring that institutions aren’t unintentionally subjected to more stringent requirements due to inflationary asset growth.
Implications for FDICIA readiness
The proposed changes are particularly relevant for banks currently approaching and planning for the $500 million and $1 billion asset thresholds — key benchmarks under the Federal Deposit Insurance Corporation Improvement Act (FDICIA) that trigger significant compliance obligations, including:
- Independent financial audits would only be required for institutions over $1 billion (increase from $500 million).
- The establishment and composition of an audit committee.
- General composition requirements: The asset threshold for requiring an audit committee composed entirely of outside directors would increase from $500 million to $1 billion.
- Independence requirements: For institutions with assets between $1 and $5 billion, the audit committee must comprise a majority of outside directors who are independent of management.
- Enhanced independence requirements: For institutions with assets over $5 billion, the audit committee must comprise only outside directors who are independent of management.
- Management assessments of internal controls would only be required for institutions with over $1 billion in assets (an increase from $500 million).
- A financial statement auditor opinion on internal controls over financial reporting (ICFR) would only be required for institutions with assets over $5 billion (an increase from $1 billion).
Public comment period
The proposed rule is open for public comment for 60 days following its publication in the Federal Register in July 2025. Stakeholders are encouraged to provide feedback.
Conclusion
In light of these proposed changes and considerations, there’s continued emphasis on the preparation of crossing these thresholds. As with all legislation and rulemaking, proposed changes could be delayed and/or alter the timing of when institutions must comply, but it doesn’t eliminate the need for proactive planning.
The FDIC’s July 2025 proposal to adjust index thresholds under 12 CFR Part 363 represents a thoughtful response to inflationary pressures and evolving industry dynamics and increases the importance of early and strategic planning for FDICIA compliance. Institutions that stay informed and proactive will be best positioned to navigate these regulatory shifts in the most efficient and effective manner.
