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Tailored bank regulations and updated thresholds

Chairman French Hill (AR-02) and Republican members of the House Committee on Financial Services sent a letter to Federal Reserve Vice Chair for Supervision Michelle Bowman, Comptroller of the Currency Jonathan Gould, and Federal Deposit Insurance Corporation Acting Chairman Travis Hill encouraging the federal banking regulators to reconsider the application of Enhanced Prudential Standards for banks in categories II, III, and IV.

In the letter, the lawmakers emphasized the need for tailored regulations based on actual risk rather than the “one-size-fits-all” approach applied to regional and midsize banks. Committee Republicans also suggested indexing regulatory thresholds to economic growth metrics to ensure a competitive and resilient banking system.

Source: S&P Global Market Intelligence

Right-sizing regulatory system

Federal Reserve Governor Stephen Miran said stringent regulatory requirements have driven banks to merge and shifted lending activities from traditional banking into the realm of private credit.

Speaking at a Bank Policy Institute event Nov. 19, Miran argued that deregulation could enable banks to reclaim market share lost to private credit in recent years.

"I do think that part of the reason that explains some of the growth in private credit is the regulatory overreach that made it much more expensive for banks to extend credit, and so as a result, nonbanks are interested in credit," he said. "As we right-size the bank regulatory system, I think that what you'll see is some of the credit creation coming back."

Source: S&P Global Market Intelligence

Big changes to bank supervision

The Federal Reserve Board introduced new supervisory operating principles aimed at improving bank supervision and addressing material financial risks that threaten the stability of financial institutions.

Changes outlined in the Nov. 18 memo include examinations focused on material financial risks; limiting the use of matters requiring attention, matters requiring immediate attention and enforcement actions; lowering the thresholds for terminating those notices; and looser liquidity measurements.



Key changes include a focus on material financial risks rather than procedural shortcomings. Examiners should tailor their exams to a bank's size, complexity and systemic importance by "using relatively more resources on large, complex and more systemic organizations and relatively less resources on smaller, less complex and less systemic organizations," Fed officials said in the memo.

The memo also said examiners "should not discourage or prohibit firms from taking into account liquidity available" from Federal Home Loan Banks when performing internal liquidity stress tests or managing liquidity.

Source: S&P Global Market Intelligence

Industry at odds over deposit insurance reform

The banking industry is at odds over deposit insurance reform, with some supporting a fortyfold increase from the current level and others wanting to stick to the status quo.

It has been over two years since several large regional bank failures brought uninsured deposits into the spotlight and raised debate about deposit insurance levels, but no changes have been made. The debate reignited recently following a newly proposed bill and congressional hearings, but the banking industry is not in agreement.

During a Nov. 18 House hearing on the topic, one bank CEO said higher Federal Deposit Insurance Corp. coverage would put smaller banks on a more level playing field with the largest institutions, while a community bank CEO said the current level is sufficient and raising the cap would result in higher deposit insurance fees that would hurt smaller banks.

A Senate bill gaining traction seeks to raise the deposit insurance limit for non-interest-bearing business accounts to $10 million, 40 times the current level of $250,000. "We don't see the bill becoming law this year, but its chances for 2026 are improving," wrote Ian Katz, managing director at Capital Alpha Partners LLC, in a Nov. 17 report.

In late October, Treasury Secretary Scott Bessent wrote a joint letter with one of the bill's sponsors, Sen. Bill Hagerty (R-Tenn.), voicing support for raising the cap for business accounts to $10 million.

"This would put community banks on a more even playing field with their larger competitors and provide small businesses more certainty to maintain their payroll and other operating accounts with community banks in times of stress," they wrote.

The Independent Community Bankers Association also supports the bill.

While the future of deposit insurance reform remains cloudy, one thing was clear: "There's a wide-ranging set of views on this matter with no consensus," House Financial Services Committee Chairman French Hill (R-Ark.) said during his opening remarks.

Source: S&P Global Market Intelligence

OCC to reduce BSA/AML reg burden

Key The OCC announced supervisory and regulatory actions to reduce regulatory burdens for community banks related to the Bank Secrecy Act and anti-money laundering requirements.

In bulletins to national banks, the OCC:

• Issued Community Bank Minimum Bank Secrecy Act Examination Procedures that tailor the agency’s application of the BSA/AML examination procedures for all community banks, effective for examinations beginning Feb. 1, 2026.
• Announced that it is discontinuing its Annual Money Laundering Risk System data collection to reduce reporting burden on community banks.

The OCC also issued a request for information to better understand the challenges community banks face with core service providers and other essential third-party service providers.

The OCC said its work to prioritize community bank reforms is ongoing and includes work on a proposal to reduce the Community Bank Leverage Ratio requirement that will be announced soon. The OCC last month announced several ICBA-supported efforts to reduce the regulatory burden for community banks.

Source: ICBA

An article from
S&P Global

AI upskilling: Navigating the urgent
need for workforce transformation

"Generative AI promises to speed up and simplify workflows, but enterprises are quickly learning that successful deployment and adoption are neither quick nor easy."

In this article from S&P Global Market Intelligence, an ACB Preferred Solutions Provider, Alex Johnston, Sarah Barry James, and Ethan Ray discuss: The state of AI integration in the workforce; The productivity paradox with AI; Current challenges with upskilling; The case for upskilling; and Call to action.

Click here to learn more.

Source: S&P Global Market Intelligence

Regulators seek input to streamline call reporting

US bank regulators are considering an overhaul of the quarterly call reporting process, seeking industry feedback on a wide range of measures aimed at reducing compliance burdens.

On Dec. 1, the Office of the Comptroller of the Currency (OCC), the Federal Reserve Board, and the Federal Deposit Insurance Corp. (FDIC) issued a request for information (RFI) regarding the Consolidated Reports of Condition and Income, commonly known as call reports. The RFI requests feedback on the factors contributing to the regulatory reporting burden for institutions that submit any of the three types of call report: FFIEC 031, FFIEC 041, or FFIEC 051, according to a Dec. 1 release.

Specifically, the agencies are seeking banks' input on which call report schedules and line items are the most time-consuming; which are less relevant to monitoring safety and soundness; and whether there is technology banks can utilize to streamline data collection, according to a Dec. 1 notice published in the Federal Register.

Recognizing the importance of peer comparison, they are also interested in understanding which data points banks rely on most and would be disadvantaged by losing, as well as identifying data points that would benefit from more granularity.

A notable consideration is the potential increase in the asset threshold for banks eligible to submit a streamlined version of call reports during the first and third quarters. Currently, institutions with less than $5 billion in assets qualify, but agencies are contemplating expanding this eligibility to institutions with significantly greater total assets.

Comments are due by Jan. 30, 2026.



Source: OCC; Federal Reserve; FDIC

Community banks pay more for compliance

The Conference of State Bank Supervisors  published data showing banking regulation is more burdensome on community banks.

Based on 10 years of data from its Annual Survey of Community Banks, CSBS said:

• Smaller banks reported spending 11%-15.5% of their payroll on compliance tasks, compared with 6% to 10% at the largest institutions.
• Data-processing costs consume 16.5%-22% of small banks’ budgets versus 10%-14% for larger banks.
• Consulting costs diverged the most, at roughly 50%-64% for the smallest banks compared to 19%-30% for the biggest.

Source: CSBS

Guidance on ACRE Act tax exclusion

In aThe Treasury Department and IRS issued interim guidance for the ACRE Act tax exclusion for agricultural lending.

Recently passed legislation added a section to the Internal Revenue Code that allows lenders to exclude from gross income 25% of the interest they receive from loans secured by rural or agricultural real property.

The IRS said the guidance defines key terms, establishes standards for determining whether a loan is secured by rural or agricultural property, and provides rules regarding loans that refinance a prior loan but also include new money. Proposed regulations are forthcoming and will be similar to the guidance.

In a joint letter earlier this year, ICBA and ACB along with other affiliated state community banking associations called on Treasury to ensure the exclusion applies to as many agricultural loans as possible. The groups urged Treasury Department to take a broad interpretation of loans used to acquire rural and agricultural real estate, including any loan secured by such real estate.

ICBA is reviewing the guidance and plans to submit formal comments ahead of the Jan. 20 comment deadline. ICBA’s primary concern remains ensuring the regulations qualify as many loans as possible, consistent with the statute, and don’t impose restrictions that would deny interest rate relief to the farmers and ranchers the new law is designed to benefit.

Source: ICBA