Banks Start Fresh Amid Regulatory Turnover

Downsizing and turnover within the federal banking agencies have many community bank executives facing an eroding relationship with their primary regulator — and by extension, the valuable conversations and insights that might have benefited them.

According to Bank Director’s 2026 Risk Survey, 35% of bank leaders felt the examiner on their most recent examination was inexperienced compared with previous years. For those who indicated the Federal Deposit Insurance Corp. was their bank’s primary regulator, that percentage was higher, at 42%.

There’s a good reason why. In a March report, the FDIC Office of Inspector General said the agency had experienced a 20% decrease in staff in 2025, much of that due to federal government restructuring in the early months of the Trump administration. Retirements also accounted for much of the reduction in staff. More retirements will come: More than a quarter of FDIC staff became eligible to retire in 2025, and 17% are eligible in 2026.

A regulatory changing of the guard is something every bank will deal with sooner or later. Though few bankers relish regulatory exams, the relationship with their agency is an important one that’s worth developing. Bank leaders who cultivate a more positive relationship can have more constructive conversations with their examiner, who will have a stronger understanding of the institution’s business model and markets. The examiner may also have more patience in responding to any issues that may arise.

Managing the regulatory relationship is typically the responsibility of senior management — often the CEO or chief compliance officer — rather than the board. How that executive approaches the examination process will set the tone for how the rest of the team responds to examiners’ requests, says Robert Maddox, a partner at Bradley Arant Boult Cummings who has helped banks work through consent orders and other regulatory actions.

“Right, wrong or indifferent, that’s your regulator. You can either look at it as an adversarial relationship or as an opportunity,” he says. “You don’t have to love them, but they’re going to be there, and from a leadership position, the way that you engage is likely the way your team is going to follow.”

Bank leaders can also encourage their teams to get organized ahead of an examination. Syed Raza, a managing director at FTI Consulting, recommends that bank staff approach each examination as though it is the examiner’s first time at the bank. That means preparing introductory materials for examiners that include the bank’s background, history, business plan, markets, key players, and main products and services. He also says staff should craft a narrative around any significant developments since its last exam.

“As a compliance and risk management executive, you have to anticipate what questions examiners might have,” Raza says. “You should always treat it like it’s this person’s first time in this bank. It’s like having a new guest at your house.”

Electronic files should be organized and should use consistent naming conventions throughout, Raza adds. Make sure the language and naming conventions used within those materials match the language used on the examination letter. “You don’t want people to guess,” he says. “That burns time on both sides and results in additional follow-up questions.”

A “hyper-organized data room” can go a long way in improving regulatory relations, says Joe Porter, a consultant and lawyer working with community banks. A self-assessment prior to an examination can help staff prepare, he adds. Identify products that may be viewed as unique or higher risk, as well as any genuine weaknesses within the bank. Be prepared to explain what management is doing to mitigate those risks.

If the bank’s examiner doesn’t change, there’s still room to improve the relationship — even if it’s been adversarial in the past. “Go back over what happened the last time and what their hot buttons [were]. If there’s a particular person who really set them off — if the CEO, for example, was contentious with them the last time they were in — have somebody else be the point person,” Porter says. “You have to view the newest exam as a fresh start.”