Our Take: financial services regulatory update – March 6, 2026

March 06, 2026

Change remains a constant in financial services regulation

Read "our take" on the latest developments and what they mean.

Regulators speak on liquidity

What happened? On March 3^rd, Fed Vice Chair for Supervision Michelle Bowman and Treasury Undersecretary for Domestic Finance Jonathan McKernan (on behalf of Treasury Secretary Scott Bessent) spoke at The Roundtable on Liquidity and Lender of Last Resort.

What did they say? Both Bowman and Bessent’s remarks argue that the current liquidity framework may be discouraging banks from using the Fed’s discount window and keeping liquidity buffers as static balance-sheet requirements rather than usable sources of liquidity. Against that backdrop, they discussed several specific issues within the current framework:

Disclosure and stigma around discount window borrowing. Bowman noted that existing disclosure rules may contribute to stigma associated with borrowing from the Federal Reserve’s discount window, potentially discouraging banks from using the facility even when appropriate.
Cost of borrowing and testing the discount window. Bowman also highlighted that discount window borrowing is priced above comparable market funding, meaning that even testing operational readiness to use the facility can be costly for banks.
Operational differences across Reserve Banks. Bowman pointed to variations in how the discount window is administered across Federal Reserve Banks and suggested that greater consistency could improve accessibility and usability.
Limited recognition of pre-positioned collateral in liquidity planning. Bessent suggested that banks’ ability to borrow against collateral already pre-positioned at the discount window could be better reflected in liquidity planning frameworks.
Supervisory expectations around discount window use. Both suggested that borrowing from the discount window is often treated as an emergency measure rather than a routine liquidity management tool, indicating that supervisory expectations may need to evolve to normalize its use.
Liquidity rule calibration. Bowman indicated that the calibration of the Liquidity Coverage Ratio (LCR) may encourage banks to hold excessively large quantities of high-quality liquid assets (HQLA), a dynamic she described as “liquidity hoarding.”

Our Take

Liquidity reform emerges as the next regulatory frontier, moving from concept to mechanics

The speeches show that liquidity regulation reconsideration is next on the agenda once the current round of capital and supervisory reforms is further along. By focusing on discount window stigma and the usability of liquidity buffers, Bowman and Bessent are effectively challenging a core assumption of the post-crisis framework: that liquidity resilience is achieved by banks holding large stocks of HQLA such as U.S. Treasuries.

The most immediately actionable reforms would take concrete steps to attempt reducing discount window stigma and increasing operability during stress. These include narrowing the pricing spread that makes borrowing costly even for routine testing, revisiting disclosure practices that make borrowing visible to markets, standardizing collateral and documentation practices across Reserve Banks, and clarifying through supervisory guidance that the use of liquidity buffers or central bank facilities during genuine stress will not automatically trigger adverse supervisory conclusions. Taken together, these measures would not alter formal liquidity ratios but could materially shift how banks treat the window in practice.

From liquidity held to liquidity mobilized

The more consequential shift would come if regulators move toward recognizing pledged loan collateral at the discount window or Federal Home Loan Banks as available liquidity for purposes of regulatory buffers and ratios. If that borrowing capacity begins to carry regulatory weight, banks would have less need to maintain large precautionary portfolios of HQLA simply to satisfy liquidity metrics. That would expand usable liquidity and increase banks’ capacity to deploy funding towards lending and other commercial pursuits. It is important to recognize that the implications of this change could extend beyond individual balance sheets. To the extent that recognition of pre-positioned collateral reduces the structural incentive to maintain large HQLA portfolios, demand for longer-duration bonds could decline. The magnitude and persistence of any impact on term premiums or the yield curve would depend on how reforms are calibrated, but the possibility warrants careful analysis as the policy is formulated.

Notably, neither speech laid out any other specific changes to LCR calibration. Regulatory reform discussions following the 2023 bank failures included proposals to revisit deposit runoff assumptions, introduce a shorter-term five-day coverage ratio (compared to the 30-day in current regulatory measures) to account for the speed of modern-day bank runs, require greater pre-positioning of collateral, or address the LCR’s lack of differentiation between available-for-sale and held-to-maturity securities. While the agenda has now shifted toward making the framework less onerous, there are open questions about how to make the LCR better align with contemporary real-world liquidity dynamics, including the possibility that outflow rates are reconsidered to reflect faster, higher-magnitude deposit runs.

What this means for bank liquidity strategy

For banks, the practical implication is that the next phase of liquidity reform may have significant impacts on increasing funding capacity although any inclusion of pledged loan collateral in liquidity buffers will likely be capped. Realistically banks will have to wait and see for proposed rulemaking to understand how much HQLA portfolios should be repositioned. Greater importance of prepositioned loan collateral also increases the importance of demonstrating high-quality loan data. Directing investment to strengthen the ability to demonstrate the robustness and auditability of loan data is a no-regrets move that may be dividends as the liquidity rules are rewritten.

Agencies issue FAQs on tokenized securities

What happened? On March 5th, the Fed, OCC and FDIC issued joint FAQs addressing the capital treatment of tokenized securities.

What’s in the FAQs? The agencies made three practical clarifications:

Capital treatment does not change simply because a security is tokenized. If a tokenized security is legally identical to its traditional form, it receives the same capital treatment under the capital rule. In other words, tokenizing a bond or equity instrument does not change its risk weight or capital requirements. The agencies noted that tokenized securities that do not confer identical legal rights to the traditional form are outside the scope of this FAQ.
Tokenized securities can qualify as financial collateral – if they meet existing requirements. If an eligible tokenized security meets the definition of “financial collateral” under the capital rule, it may be recognized as such for credit risk mitigation purposes. This means it must satisfy the same legal and operational standards as traditional securities – including having a perfected, first-priority security interest – and the same haircuts apply.
No distinction between permissioned and permissionless blockchains. The capital rule does not treat tokenized securities differently based on whether they are issued or recorded on a permissioned or permissionless blockchain.

Our Take

Clearing the capital path for tokenization – and raising questions on stablecoins

The FAQ itself is technical and narrow, but its significance lies in what it removes from the digital asset debate. By clarifying that legally equivalent tokenized securities receive identical capital treatment, the agencies are eliminating one of the remaining regulatory uncertainties around institutional tokenization. That clarity has implications beyond tokenized securities themselves. If banks can tokenize securities and other instruments without incurring incremental capital costs, distributed ledger technology becomes easier to integrate within the existing prudential framework. Viewed in that light, the FAQ indirectly shapes the broader settlement landscape. As banks expand instant payment capabilities and experiment with tokenized liabilities, capital neutrality strengthens the case for regulated tokenized instruments as an alternative to privately issued stablecoins. The agencies are not drawing that comparison explicitly, but by eliminating capital ambiguity, they ensure that regulatory treatment will not tilt the competitive balance. Which model ultimately prevails will depend less on prudential constraints and more on market demand, efficiency, and trust.

On our radar

OCC finalizes rules to reduce regulatory burden for community banks. On March 3, the OCC issued two final rules aimed at streamlining requirements for community banks. The first rule rescinds the Fair Housing Home Loan Data System regulation, eliminating obsolete and duplicative home loan data reporting that applied only to national banks. The second rule broadens eligibility for expedited or reduced-filing licensing procedures, expanding speedy licensing for banks under $30B in assets.

SEC announces roundtable on options market structure reform. On March 5^th, the SEC announced it will host a public roundtable on April 16, 2026 to discuss listed options market structure, including competition in quote-driven markets, customer experience, and opportunities for continued market growth.

CFTC advances prediction markets rulemaking. On March 3^rd, the CFTC submitted an advance notice of proposed rulemaking (ANPR) on a framework governing prediction markets to the Office of Information and Regulatory Affairs (OIRA) for review — a preliminary step that would allow the agency to solicit stakeholder input to address open questions around permissible event contracts, market integrity, and consumer protection.

SEC adopts final rules implementing the Holding Foreign Insiders Accountable Act. On February 27^th, the SEC adopted final amendments to its Exchange Act rules and Forms 3, 4, and 5 to implement the Holding Foreign Insiders Accountable Act, requiring directors and officers of foreign private issuers with a class of equity securities registered under Section 12 to file Section 16 beneficial ownership reports. The amendments revise Rules 3a12-3 and 16a-2 and related forms to reflect the statutory changes, clarify that 10 percent holders of foreign private issuers are not subject to the new reporting requirement, and make conforming technical updates. The rule is effective March 18, 2026.

House Financial Services Committee advances Main Street Capital Access Act. On March 5th, the Main Street Capital Access Act, sponsored by HFSC Chairman French Hill and Rep. Andy Barr, passed out of committee by a 26-16 vote. The legislation aims to promote de novo bank formation, tailor regulatory requirements for community institutions, and reduce supervisory burdens so local lenders can focus on serving families, small businesses, and local economies.

ECB releases working paper on stablecoins and monetary policy transmission. On March 3^rd, the European Central Bank published a working paper titled “Stablecoins and monetary policy transmission,” analyzing how growing stablecoin adoption could affect bank funding, credit supply, and the effectiveness of monetary policy. The paper finds that stablecoins may contribute to deposit substitution and increased wholesale funding reliance, with potential implications for monetary policy transmission and financial stability.