WASHINGTON — Comptroller of the Currency Thomas Curry sought to reassure community bankers this week that the agency does not expect them to comply with its "heightened expectations" proposal aimed at bolstering risk management and improving governance at the biggest banks.

The pending guidelines are meant to capture financial institutions of at least $50 billion in assets, but smaller banks became concerned when the OCC included a provision that they might also apply to banks below that threshold if their operations are deemed "highly complex."

But in a speech before the American Bankers Association's risk management forum, Curry said they would only apply the standards to smaller institutions in extraordinary circumstances.

"Some community bankers may be reading that language as a loophole that we will use to impose onerous new requirements on community banks. I want to assure you that this is not the case and not our intent," said Curry on Thursday. "I can promise that we will consider all the feedback we have received on this and other aspects of our proposal and make any necessary adjustments before the document goes final."

The guidelines are still open for comment until March 28 and Curry said the agency will carefully weigh responses.

The guidelines essentially require banks to establish three lines of defense that would monitor risk management and corporate governance: front-line units, independent risk management and internal audit. It also sets stronger standards for board of directors and expectations to hold management accountable.

Some observers were slightly surprised by the detail the agency delved into, such as requiring boards to "challenge" management, and that it could potentially extend to smaller banks.

"Perhaps the single question I am asked most often these days by community bankers is whether the new regime would apply to them, too," Curry said in his remarks. "I also can assure you that the OCC will continue to supervise community banks in the manner that these banks have come to expect — as institutions with supervisory needs, both individually and as a group, that generally are very different from institutions many times their size."

Curry said they have made "serious effort" to ensure the rules they are implementing from the Dodd-Frank Act do not "saddle community banks" with unnecessary regulation. He noted that they gave a differential for community banks in their rule on domestic capital as well as a small bank exemption for the stress test requirements.

"We devise a supervisory strategy suitable to each bank's strengths and weaknesses. That generally means that OCC examiners will pay special attention to areas where risk might be elevated while spending less time in areas where risk is mitigated and well controlled," he said. "In a nutshell, the OCC's approach to community bank supervision is balanced, tailored, and expert."

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