FDICIA Thresholds Changed. Smart Controls Still Matter.

Community bankers have something new to factor into their 2026 planning: changes to the FDIC’s audit and internal control requirements under 12 CFR Part 363. The asset thresholds have been raised—moving from $500 million to $1 billion, and from $1 billion to $5 billion. As a result, many banks will soon find themselves outside the scope of certain FDICIA requirements.

For institutions that fall below these new thresholds as of December 31, 2025, the change brings real regulatory relief starting January 1, 2026. There will be less prescriptive compliance and fewer mandated reports. Consequently, banks will have more breathing room.

That’s the good news.

The more important question is what comes next.

While the rules may have changed, the risks facing community banks haven’t gone away. In fact, many of them have intensified. Digital banking continues to expand. Fraud schemes are becoming more sophisticated. Third-party and fintech relationships are more complex than ever. Additionally, staffing turnover—especially in key operational and finance roles—can quietly weaken controls. This risk is especially true if no one is paying close attention.

In other words, being below an FDICIA threshold doesn’t mean your risk profile suddenly dropped.

That’s why it would be a mistake to treat these changes as a signal to dismantle or significantly scale back your internal control framework. History shows that weak controls, management overrides, and limited oversight remain some of the leading contributors to fraud losses and operational breakdowns. This occurs regardless of asset size.

Boards and audit committees still need clear visibility into financial reporting, control effectiveness, and enterprise risk. Even with fewer formal FDICIA requirements, that responsibility doesn’t disappear. If anything, it becomes more important to ensure that regulatory relief doesn’t unintentionally open the door to new vulnerabilities.

The upside? This moment creates a real opportunity for community banks.

Instead of asking, “What can we eliminate?” the better question is, “How can we right-size our controls?” Strong internal controls don’t have to be overly complex or expensive to be effective. Furthermore, when they’re aligned with your bank’s actual risk profile, technology environment, and strategic goals, they can be both efficient and sustainable.

Now is the time to modernize—streamline manual processes, focus on higher-risk areas, and make sure controls evolve alongside digital delivery channels and third-party relationships. If done well, a right-sized control environment supports resilience and protects customers. Ultimately, it positions your bank for long-term success.

FDICIA relief may reduce the compliance burden, but sound controls are still a cornerstone of safe, well-run community banks. The smartest institutions will use this change not as a reason to step back—but as a chance to sharpen their focus.