Board of Governors of the Federal Reserve System

Regulatory Developments

The Federal Reserve has taken several regulatory and policy actions since the publication of the Fall 2024 Supervision and Regulation Report. Key actions are detailed in table 1. All Supervision and Regulation (SR) and Consumer Affairs (CA) letters are available on the Federal Reserve Board's public website.⁶

Table 1. Federal Reserve or interagency rulemakings (proposed and final), statements and other regulatory developments

Economic Growth and Regulatory Paperwork Reduction Act of 1996

In December 2024 and July 2025 the federal bank regulatory agencies announced their third and fourth notices, respectively, requesting comment to reduce regulatory burden.⁷ The Economic Growth and Regulatory Paperwork Reduction Act of 1996 requires the Federal Financial Institutions Examination Council and federal bank regulatory agencies to review their regulations every 10 years to identify any outdated or otherwise unnecessary regulatory requirements for their supervised institutions. The federal bank regulatory agencies divided their regulations into 12 categories and are soliciting comments. The third request solicited feedback on: Rules of Procedure, Safety and Soundness, and Securities. The comment period for the third request closed on March 11, 2025, and the federal banking agencies received 23 comment letters. The fourth request solicited feedback on: Banking Operations, Capital, and Community Reinvestment Act. The comment period on the relevant regulations closed October 23, 2025, and the federal banking agencies received 63 comment letters. In total, the agencies have received 144 written comments and more than 60 oral comments from outreach events.

On March 6, 2025, the federal bank regulatory agencies held the second virtual public outreach meeting as part of their review of regulations.⁸ The outreach meeting was an opportunity for stakeholders to present their views on the six categories of regulations listed in the first two Federal Register notices: Applications and Reporting; Powers and Activities; International Operations; Consumer Protection; Directors, Officers, and Employees; and Money Laundering. The federal bank regulatory agencies held the third public outreach meeting in Kansas City, Missouri, on October 30, 2025. This outreach meeting was an opportunity for stakeholders to present their views on the regulatory categories listed in any of the four Federal Register notices. The federal bank regulatory agencies will announce additional public meetings in 2026.

Modifications to the Enhanced Supplementary Leverage Ratio Standards

On November 25, 2025, the federal bank regulatory agencies jointly issued a final rule that modifies certain regulatory capital standards to reduce disincentives a banking organization may have to engage in lower-risk activities, such as intermediating in U.S. Treasury markets. The final rule is substantially similar to the proposal issued in June, with changes at the depository institution level.

The final rule modifies certain leverage capital standards applicable to the largest and most systemically important banking organizations to serve as a backstop to risk-based capital requirements and to avoid discouraging these organizations from engaging in low-risk activities. The rule sets the standard for these bank holding companies and their depository institution subsidiaries based on each organization's overall systemic risk.

For depository institution subsidiaries, the final rule differs from the proposal by capping the enhanced supplementary leverage ratio standard at 1 percent, making the overall requirement for these institutions no more than 4 percent. This treatment is intended to reflect differences in the capital requirements and systemic risk profile of the overall organization relative to its depository institution subsidiaries. This change would also help ensure that the leverage standard operates as a backstop to risk-based capital requirements for depository institutions, particularly during times of stress.

The agencies estimate that overall levels of capital that banking organizations maintain will remain broadly unchanged as a result of this rule. In aggregate, the rule will reduce tier 1 capital requirements for affected bank holding companies by less than 2 percent. While depository institution subsidiaries would see greater reductions, that capital generally would not be available for distribution to external shareholders because of capital restrictions at the holding company level.

The final rule also includes conforming changes to other regulations that are tied to the leverage capital standards, such as the total loss-absorbing capacity and long-term debt requirements.

The final rule will take effect on April 1, 2026. Banking organizations may elect to adopt the modified standards beginning January 1, 2026.

Recalibration of the Community Bank Leverage Ratio

On November 25, 2025, the federal bank regulatory agencies invited public comment on a proposal that would implement changes to the community bank leverage ratio (CBLR) framework in accordance with statutory authority. By incorporating these changes, the revisions would reduce regulatory burden and provide community banks with greater flexibility and optionality in their capital management approach. The proposal reflects a deeper understanding of the unique business models, risk profiles, and operational realities of community banks. These tailored modifications represent a necessary step in continuing to focus attention on the unique needs of community banks in today's financial landscape.

The proposal would lower the CBLR requirement to 8 percent from the current 9 percent. The proposal would also extend the grace period, from two quarters to four quarters, for a community bank that opts into the framework and falls out of compliance to come back into compliance.

The proposal would continue to require a level of capital that is consistent with ensuring the safety and soundness of community banks and comparable to—or higher than—the amount required under the risk-based capital framework. It would also maintain a leverage ratio that is double the minimum leverage ratio applicable to community banks that do not opt into the framework.

Comments on the proposal are due 60 days after publication in the Federal Register.

Revisions to the Large Financial Institution (LFI) Rating System and Framework for the Supervision of Insurance Organizations

On November 5, 2025, the Board finalized changes to its supervisory rating framework for large bank holding companies and supervised insurance organizations. The finalized framework is substantially similar to the proposal issued on July 10, 2025.

The Board's large bank supervisory rating framework, issued in 2018, evaluates whether these firms have sufficient financial and operational strength and resilience to maintain safe-and-sound operations and comply with laws and regulations through a range of conditions. The framework includes three components: capital, liquidity, and governance and controls. Each component has four potential ratings: broadly meets expectations, conditionally meets expectations, deficient-1, or deficient-2.

The finalized framework will now consider a firm with no more than one deficient-1 rating to be "well managed." Consistent with the prior framework, a firm with a deficient-2 rating for any component will continue to be considered not well managed. Firms that are not well managed face limitations on certain activities and acquisitions.

The revisions contained in the finalized framework will take effect on January 16, 2026.

Revisions to Stress Testing Practices and Framework

In December 2024, the Board announced that it would seek public comment on a proposal to make significant changes to its supervisory stress test process and framework to improve their transparency and reduce volatility.⁹ In April 2025, the Board requested comment on a proposal to reduce the volatility of the capital requirements stemming from the Board's annual stress test results.¹⁰

On October 24, 2025, the Board requested comment on the models it uses to determine the hypothetical losses and revenue of firms for the supervisory stress test and on a process to update the models at a frequency that ensures they remain dynamic while still subjecting those future changes to notice and comment. The Board also requested public comment on the supervisory scenarios used in the supervisory stress test and changes to the framework that guides the design of the hypothetical scenarios. In doing so, the Board seeks to improve the transparency of its supervisory stress test, while retaining appropriate risk sensitivity and risk capture in capital requirements, as well as effective tools for understanding and assessing risk. Comments on the 2026 scenarios are due by December 1, 2025. Comments on the proposal enhancing model and scenario transparency are due by February 21, 2026.

Statement of Supervisory Operating Principles

On November 18, 2025, the Board released information regarding enhancements to bank supervision. The new supervisory operating principles were provided to all Federal Reserve supervisory leadership and staff and are intended to focus Federal Reserve examiners on material financial risks that may impact the safety and soundness of banks and on taking timely, proportionate action to ensure that those risks are properly addressed.

The principles align bank examination and ratings to material financial risks, reduce duplication between exams from different supervisors, and streamline the remediation of issues cited by supervisors. The Federal Reserve is training examiners to help ensure prompt implementation of the principles. Supervision leadership will continue to refine these principles and expects to formalize them in public supervisory guidance or regulatory changes, where appropriate.

 

References

 

6. The Federal Reserve publishes SR and CA letters to address significant policy and procedural matters related to the Federal Reserve System's safety-and-soundness and consumer compliance supervisory responsibilities, respectively. SR letters are available on the Board's public website at https://www.federalreserve.gov/supervisionreg/srletters/srletters.htm, and CA letters are available on the Board's public website at https://www.federalreserve.gov/supervisionreg/caletters/caletters.htm. Return to text

7. See Board of Governors of the Federal Reserve System, "Federal Bank Regulatory Agencies Seek Further Comment on Interagency Effort to Reduce Regulatory Burden," news release, December 3, 2024, https://www.federalreserve.gov/newsevents/pressreleases/bcreg20241203a.htm; Board of Governors of the Federal Reserve System, "Federal Bank Regulatory Agencies Seek Further Comment on Interagency Effort to Reduce Regulatory Burden," news release, July 21, 2025, https://www.federalreserve.gov/newsevents/pressreleases/bcreg20250721a.htm. Return to text

8. See Board of Governors of the Federal Reserve System, "Agencies Announce Second Public Outreach Meeting as Part of Their Review of Regulations," news release, January 31, 2025, https://www.federalreserve.gov/newsevents/pressreleases/bcreg20250131a.htm. Return to text

9. See Board of Governors of the Federal Reserve System, "Due to Evolving Legal Landscape and Changes in the Framework of Administrative Law, Federal Reserve Board Will Soon Seek Public Comment on Significant Changes to Improve Transparency of Bank Stress Tests and Reduce Volatility of Resulting Capital Requirements," news release, December 23, 2024, https://www.federalreserve.gov/newsevents/pressreleases/bcreg20241223a.htm. Return to text

10. See Board of Governors of the Federal Reserve System, "Federal Reserve Board Requests Comment on a Proposal to Reduce the Volatility of the Capital Requirements Stemming from the Board's Annual Stress Test Results," news release, April 17, 2025, https://www.federalreserve.gov/newsevents/pressreleases/bcreg20250417a.htm. Return to text