Our Take: financial services regulatory update – March 13, 2026

March 13, 2026

Change remains a constant in financial services regulation

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

Vice Chair Bowman speaks on capital

What happened? On March 12th, Fed Vice Chair for Supervision Michelle Bowman delivered a speech titled “Capital Rules for the Real Economy.”

What did Bowman say? Vice Chair Bowman described several upcoming proposals and addressed the combine effect of the changes. She said the Basel III proposal is expected to result in a small increase in capital requirements for the largest banks, while the global systemically important bank (GSIB) surcharge proposal would produce a modest decrease, with the combined effect being a small net decrease.

Basel III endgame rethink. After recently confirming that the modified Basel III endgame proposal will be released in the coming weeks, Bowman described more detail on what it would contain:
- For credit risk, it would add risk sensitivity to mortgage and retail lending by recognizing loan-to-value ratios in mortgage requirements and repayment history in retail lending, without adding new capital penalties for mortgages or consumer lending , and it would seek comment on the role of private mortgage insurance.
- For operational risk, it would adopt standardized requirements tailored for large US banks, including netting certain fee-based revenues and expenses (e.g., credit cards) and calibrating requirements to reflect lower observed operational risk for certain activities such as wealth management and custody services.
- For market risk, it would strengthen trading capital requirements in a way calibrated to US markets, including a standardized calculation that applies consistently across firms while reducing burden for banks with simple trading activities; relative to the Basel standard, it would better recognize diversification and extend the use of bank internal models where data are sufficiently robust.
- For credit valuation adjustment (CVA) risk requirements, it would introduce a capital requirement focused on bilateral derivatives activity among large financial firms, while avoiding unintended costs for commercial end users. Bowman also noted the proposal was developed with attention to overlap with the stress test, with the Fed evaluating the combined effect so that requirements capture risk without becoming overly punitive.
Broader risk-based capital changes. Separate from the Basel III endgame reproposal which would apply to the largest banks (and those that choose to opt-in), Bowman described a “standardized approach” proposal intended to update risk-based capital requirements for most banks. She said it would modify risk-based calculations in key lending categories including mortgages, consumer lending, and business lending, moderately reducing requirements and aligning with Basel III endgame. She also highlighted two cross-cutting changes:
- Mortgage Servicing Assets – Removing the requirement to deduct mortgage servicing assets (MSAs) from regulatory capital and instead assigning a 250 percent risk weight and requesting public feedback requested on the appropriate risk weight; and
- AOCI recognition requirements – Requiring large banks to include elements of accumulated other comprehensive income (AOCI) in common equity tier 1 (CET1) capital, with comment requested on scope and a five-year phase-in intended to avoid a material immediate increase in requirements.
GSIB surcharge re-proposal. Bowman said the Fed plans to revise the G-SIB surcharge methodology through changes that update key parameters and better align the surcharge with systemic risk. She described several concrete design changes: recalibrating the coefficients that translate systemic indicator scores into surcharges and indexing the framework to economic growth; revising the short-term funding component that was originally intended to represent 20% of the surcharge but currently represents roughly 30%; requiring certain systemic indicators to be calculated using daily or monthly averages rather than a year-end value to reduce incentives for year-end balance sheet adjustments; assigning surcharges in increments of 10 basis points rather than 50 basis points to reduce cliff effects and increase sensitivity to changes in risk profile; and improving the measurement of certain systemic indicators to align with international standards.

What’s next? The Fed and FDIC have both scheduled Board meetings for March 19th to consider the Basel III endgame, broader risk-based capital changes, and the GSIB surcharge proposals.

Our Take

Holistic approach will result in a better outcome for the largest banks than the 2023 proposal

For the largest banks, Bowman’s preview shows that the agencies are targeting a reversal of the 2023 Basel III endgame and GSIB surcharge proposals, which would have resulted in a significant increase in capital requirements. This shift will be in part achieved through a new calibration of the risk weights that will remove gold-plating, increase risk sensitivity, and avoid double-counting risks that are already captured through stress testing and the stress capital buffer, such as stressed operational losses and the global market shock for relevant firms. However, some of these changes would diverge from the 2017 Basel III agreement, which could raise questions for foreign jurisdictions and internationally active banks. For example, some jurisdictions have delayed their implementations and may now need to reassess in light of the US changes and consider adjusting their formulations to align. Should meaningful differences persist, internationally active banks may need to reassess cross-border booking models and optimization strategies.

In addition, the GSIB surcharge reform re-proposal is set to address issues banks have long raised and that were not considered in the 2023 version. Bowman described changes that would reverse parameter drift that has mechanically lifted surcharges over time, reduce the outsized influence of short-term wholesale funding relative to the framework’s intended weighting, and smooth outcomes by using indicator averages and 10-basis-point increments. Beyond improving the mechanics, these changes should have the effect of tempering the capital increase that could otherwise accompany more risk-sensitive market and operational risk requirements. They also move the surcharge toward being a more stable, predictable input to required capital as other elements of the framework are updated.

Broader regulatory capital changes bring more banks into the capital reform agenda

The discussion of broader standardized risk-based capital changes represents a meaningful expansion beyond earlier Basel III endgame discussions that largely centered on the largest banks. Although the scope of this proposal is not yet clear and banks will be eager to assess the full details next week, the intended direction is a more level playing field within the banking sector, reducing the extent to which differences in capital regulation shape competitive positioning across regional and larger firms. At the same time, a more risk-sensitive standardized regime shifts the focus from broad categories to measurable loan attributes, making implementation choices and data discipline central to the realized impact.

The shift shows up most clearly in real estate and retail credit. Mapping mortgages and commercial real estate to current loan-to-value bands should reward conservative collateralization and seasoned portfolios, but the benefit will hinge on what qualifies as “current” loan-to-value and whether modeled valuations will be acceptable with strong controls. The mortgage servicing asset change is also consequential because moving from a deduction to a risk-weighted treatment changes the economics of retaining servicing and could make “originate and hold” strategies more attractive for banks with strong valuation discipline. The request for comment on the appropriateness of the 250% risk weight also creates a critical opportunity for the industry to provide evidence supporting alternatives. Retail and corporate changes follow the same logic: lower risk weights create upside, but only if banks can operationalize the definitions cleanly – borrower aggregation and thresholds for qualifying retail treatment and disciplined internal credit assessment governance for the investment-grade corporate risk weight. For banks in scope of the AOCI change described in the proposal summary, this package also raises the importance of managing unrealized gains and losses as an input to buffer strategy, because volatility management becomes more directly linked to capital outcomes.

A capital recalibration with the potential to shift the lending landscape

Beyond merely adjusting the risk sensitivity of capital requirements, the proposals previewed by Bowman have the potential to reshape the lending landscape in the US across mortgage, consumer, and corporate credit, at a moment when parts of the nonbank credit model are facing higher funding costs and tighter investor scrutiny. As post-2008 regulatory reforms have matured and worked their way through the system, the banking industry and academics have increasingly argued that the cumulative cost and complexity of bank regulation have helped push traditional activities – such as mortgage origination and middle-market lending – toward nonbanks. By taking a scalpel to the existing highly aggregated risk weights in order to make them more sensitive to underlying risks, the contemplated proposals would lower capital charges for many asset classes. This in turn could improve the economics of holding these assets on bank balance sheets and potentially pull some credit intermediation back into the banking sector.

For more on the overall landscape for capital planning in 2026, see Our Take Special Edition.

CFTC moves on prediction markets

What happened? On March 12th, the CFTC released two documents related to prediction markets: (1) an Advance Notice of Proposed Rulemaking (ANPRM) requesting comments on a potential prediction markets regulation; and (2) a staff advisory to Designated Contract Markets (DCMs) explaining how existing requirements apply to prediction markets and reminding them of their compliance obligations.

What does the ANPRM say? It notes that the CFTC has observed increasing prediction market activity in recent years and has received increasing applications from DCMs that are primarily engaged in operating prediction markets, and in response it is seeking feedback to assist the agency with determining future action, including a potential rule. Examples of feedback requested by the ANPRM include:

Information around how existing rules prohibiting “abusive trade practices” and requiring “impartial access” apply to prediction markets platforms and whether the CFTC should issue guidance or rules related to these expectations;
Challenges associated with market surveillance and dispute resolution;
Circumstances under which the CFTC should allow margin trading and whether rules should be different for retail and institutional traders;
Which types of contracts should be prohibited due to not being in the public interest; and
Factors to be considered around insider trading, including what type of information would constitute insider trading and whether contracts around events under the control of a single individual or small group should have additional guardrails.

What does the staff advisory say? It reminds DCMs of their obligations under the Commodities Exchange Act, including:

Expectations to promote fair and equitable trading and protect market participants from abusive practices;
Responsibilities to prevent market manipulation, including not listing contracts that are “readily susceptible to manipulation;”
Expectations for self-certification with the CFTC, including the need to specify clear settlement methodologies and identifiable data sources; and
Obligations to promote settlement integrity and strong market oversight, which the advisory explains could be advanced through engagement with leagues and sports integrity bodies for sports-related events.

What’s next? Comments on the ANPRM are due 45 days following publication in the Federal Register.

Our Take

The CFTC effectively raises the bar for what “good” looks like

While the staff advisory and ANPRM do not create any new requirements, they make clear that the CFTC will have high expectations for contract design, settlement integrity and market surveillance – and that these expectations may soon be codified in a formal rulemaking. In particular, the releases highlight that the self-certification process will not be a formality and will require careful documentation and data. Further, the CFTC’s expectations around contract specificity and preventing market manipulation will require a rigorous and repeatable product governance process. Specific actions firms should take include:

Tighten settlement source governance. Firms should pressure-test whether their approach for confirming or determining the result of an event is objective, transparent, reliable, and resistant to influence. The advisory’s warning that an undefined “consensus of sources” may be insufficient means that this approach must be specific and auditable.
Evaluate surveillance and supervision readiness for evolving oversight frameworks. In practice, this means focusing on the following priorities:
- Accessing and analyzing trader-level data within event settlement windows and escalating issues promptly and consistently
- Evaluating control and governance maturity to determine if ownership structures, escalation protocols, and investigative documentation meet regulator-facing standards
- Assessing conduct risk, insider risk, and information barrier controls given the heightened sensitivity around material non-public information in event-driven markets
Treat self-certification as an evidence-backed compliance package, not a formality. Self-certification explanation and analysis should be contract-specific and supported by documentation and data, particularly the analysis and the rationale for why the contract is not readily susceptible to manipulation.
For sports-related contracts: build a league engagement and integrity playbook. Where relevant, align with league integrity standards, establish information-sharing arrangements, and consider “restricted/insider participant” concepts as part of market integrity controls.

For more, please see our recent publications on prediction markets and market surveillance.

Chairman Hill speaks on stablecoin rules and other FDIC priorities

What happened? On March 11th, FDIC Chairman Travis Hill delivered remarks on reforms to the FDIC’s “regulatory toolkit.”

What did Hill say? He provided updates on several priorities:

Stablecoins and GENIUS Act implementation. Hill announced that the FDIC plans to propose that payment stablecoins subject to the GENIUS Act are not eligible for pass-through insurance. He explained that if a stablecoin issuer’s reserve account at an insured depository institution qualified for pass-through coverage, the FDIC would effectively insure the account based on the interests of stablecoin holders rather than treating it as a single corporate deposit capped at $250,000. Hill argued that treating stablecoin holders as insured depositors, even on a pass-through basis, “seems inconsistent” with the GENIUS Act’s prohibition on payment stablecoins being “subject to Federal deposit insurance,” and he emphasized the need to resolve the issue by regulation rather than during a future bank failure.
Supervision reform. Hill said the FDIC has been refocusing examinations on material financial risks and violations of law, including examiner instructions to reorient exams, a lookback of outstanding supervisory recommendations for consistency with the new approach, and progress toward interagency CAMELS rating reforms expected to be proposed in the coming weeks.
Consumer compliance exams. Hill said the FDIC intends to make consumer compliance supervision less process-driven and more focused on outcomes, including risk-focusing for smaller banks on material products, limiting “visitations” outside the exam cycle, and raising dollar thresholds that drive the severity of violations.
Resolution readiness and failed-bank auctions. Hill said the FDIC expects to propose significant changes to its insured depository institution (IDI) resolution planning rule later this spring, and separately described work to address a “rapid failure” gap by expanding the bidder set. He said the FDIC plans to rescind its 2009 Statement of Policy that imposed extra restrictions on private investors bidding on failed banks, and is exploring an emergency exception to allow a nonbank to rapidly set up a shelf charter to bid following a sudden failure, including a proposal to act quickly on deposit insurance applications in that scenario while still meeting statutory factors.
Liquidity. Hill argued that the 2023 bank failures exposed gaps in the Liquidity Coverage Ratio (LCR) 30-day horizon and banks’ ability to monetize liquid assets quickly. He said the agencies are exploring improvements, including allowing banks to recognize (up to a cap) capacity to borrow from the Fed’s discount window in the LCR.

Our Take

Stablecoins and pass-through insurance: a bright line with practical consequences

Hill’s remarks show that the FDIC is drawing a clear line regarding pass-through deposit insurance , the clarification of which has downstream impacts to issuer reserve requirements, insurance assessments and marketing strategy. Issuers holding reserves in insured deposits will be limited to the $250,000 cap on deposit insurance per depository bank, so large issuers may not be able to obtain sufficient insured deposit capacity for reserves. Meanwhile, pass-through coverage is the feature that can make end users (in this case, stablecoin holders) feel they have deposit-level protection even when funds are held through an intermediary, and the FDIC is signaling it does not want stablecoins to benefit from that construct.

Supervision, liquidity, and resolution: making the toolkit work in real time, not just on paper

Beyond stablecoins, Hill’s agenda is wide-ranging but cohesive: it targets points where the post-crisis framework can become process-heavy in normal times and slow or brittle in stress. On consumer compliance exams, the message is consistent with other supervisory changes – less emphasis on broad process critiques and more focus on clear violations. On liquidity, Hill is aligned with the positions of Vice Chair Bowman and Treasury Secretary Scott Bessent in seeking to encourage banks to use the discount window and reduce the “hoarding” of high-quality liquid assets (HQLA) by recognizing (capped) discount window borrowing capacity in the LCR. On resolution, Hill is unusually explicit about having more options to sell failed banks: rescinding the 2009-era restrictions on private investors bidding on failed banks and exploring a rapid “shelf charter” path for nonbank bidders. Taken together, these changes prioritize clarity, operability, and agility under stress.

On our radar

NCUA proposes updates to records preservation requirements for credit unions. On March 11th, the National Credit Union Administration (NCUA) published a proposed rule to update its vital records preservation program regulation and related guidelines. The proposal would streamline existing requirements by clarifying definitions, updating regulatory language, and eliminating appendices containing record retention and catastrophic preparedness guidance that the agency views as outdated or potentially burdensome. Comments are due May 11th, 2026.

SEC Chair calls for greater regulatory harmonization with the CFTC. On March 10th, SEC Chair Paul Atkins spoke on the need for closer coordination between the SEC and CFTC in remarks at the FIA Global Cleared Markets Conference. Atkins highlighted initiatives aimed at reducing regulatory fragmentation for dually registered firms, including exploring substituted compliance between the agencies, coordinating product review discussions, and advancing joint oversight efforts such as updated memoranda of understanding and coordinated examinations.

FinCEN issues geographic targeting order for money services businesses along the southwest border. On March 10th, the Financial Crimes Enforcement Network (FinCEN) published a Geographic Targeting Order requiring certain money services businesses operating in specified counties and ZIP codes along the US southwest border to report and maintain records for currency transactions between $1,000 and $10,000 and verify customer identity.

Global regulators reaffirm Basel III implementation and launch targeted reviews. On March 9th, the Group of Central Bank Governors and Heads of Supervision (GHOS) welcomed progress toward full implementation of the Basel III reforms, noting that roughly 75% of member jurisdictions have implemented or will soon implement the standards. The GHOS also endorsed targeted reviews of the Basel Committee’s framework for banks’ crypto asset exposures and the assessment methodology for GSIBs, with updates expected later this year.

Senate advances legislation restricting institutional investment in single-family housing. On March 12th, the Senate voted 89-10 to pass the 21st Century ROAD to Housing Act, which includes a provision prohibiting large institutional investors from purchasing single-family homes, subject to several exceptions such as build-to-rent, renovate-to-rent, and certain homeownership programs. If enacted, the legislation would also require qualifying investors to dispose of certain acquired homes to individual buyers within seven years. The bill now moves to the House for consideration.