Introduction
The U.S. Banking System Remains Strong
The U.S. banking system continues to maintain strong capital and liquidity levels while maintaining strong profitability and healthy loan growth. U.S. banks are well positioned to continue to support a growing economy.
The Federal Reserve Continues to Enhance Its Regulatory Framework Through Bank Capital Reform, Innovation, and Modernization
In March 2026, the Federal Reserve and the other two prudential banking regulators proposed targeted revisions to modernize the regulatory capital framework for banks of all sizes. The proposals streamline Basel III requirements, the U.S. standardized approach capital requirements, and the GSIB surcharge framework. These changes ensure that the largest and most complex institutions maintain strong capital buffers under a range of economic conditions to support the safety and soundness of the banking system. In October 2025, the Board requested comment on additional proposals to increase the transparency and public accountability of the stress tests, and it is currently reviewing feedback on these proposals. In November 2025, the Board and the other two prudential regulators finalized changes to the enhanced supplementary leverage ratio standards to reduce disincentives banks may have to engage in lower-risk activities, such as intermediating in the U.S. Treasury markets.
On innovation, the Federal Reserve has emphasized a transparent, risk-focused approach that supports responsible technological advancement while reinforcing core supervisory principles. The Board has updated and clarified its supervisory expectations for novel activities and is working toward proposing a rule to implement the Guiding and Establishing National Innovation for U.S. Stablecoins Act. The Federal Reserve has also removed "reputational risk" as a standalone supervisory consideration.
The Federal Reserve Is Enhancing the Effectiveness of Its Supervisory Process
The Federal Reserve has taken a number of steps to enhance the effectiveness, efficiency, fairness, transparency, and public accountability of supervision. In October 2025, it issued a Statement of Supervisory Operating Principles (SSOP).1 The SSOP included a number of principles designed to strengthen supervision. Among other things, it directed examiners to focus their attention on deficiencies that created a significant threat to a firm's safety and soundness and to give less priority to procedural or documentation shortcomings. The Federal Reserve published the SSOP in November 2025 to promote supervisory transparency and public accountability. In May 2026, the Federal Reserve published an updated SSOP to provide guidance on issues that were not addressed in the original statement and to clarify some of the original guidance in response to feedback.2
The Board has also reformed its supervisory ratings framework to focus on material financial risks. In December 2025, the Board finalized revisions to the large financial institution (LFI) rating framework to better identify "well-managed" firms.3 In addition, the Federal Financial Institutions Examination Council (FFIEC) proposed changes to the CAMELS rating framework to ensure supervisory ratings reflect an institution's overall condition and safety and soundness.4
References
1. See Board of Governors of the Federal Reserve System, "Statement of Supervisory Operating Principles," October 29, 2025, https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20251118a1.pdf. Return to text
2. See Board of Governors of the Federal Reserve System, "Updated Statement of Supervisory Operating Principles," April 21, 2026, https://www.federalreserve.gov/supervisionreg/updated-statement-of-supervisory-operating-principles.htm. Return to text
3. See Board of Governors of the Federal Reserve System, "Large Financial Institution (LFI) Rating System," SR letter 19-3/CA letter 19-2 (February 26, 2019), https://www.federalreserve.gov/supervisionreg/srletters/sr1903.htm, and Revisions to the Large Financial Institution Rating System and Framework for the Supervision of Insurance Organizations, 90 Fed. Reg. 51,329 (effective January 16, 2026), https://www.federalregister.gov/documents/2025/11/17/2025-19945/revisions-to-the-large-financial-institution-rating-system-and-framework-for-the-supervision-of. Return to text
4. See Federal Financial Institutions Examination Council, "Agencies Request Comment on Financial Institutions Rating System," press release, May 19, 2026, https://www.ffiec.gov/news/press-releases/2026/pr-05-19. Return to text