Our Take: financial services regulatory update – September 12, 2025

September 12, 2025

Change remains a constant in financial services regulation

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

FSOC meets on new priorities

What happened? On September 10th, the Financial Stability Oversight Council (FSOC) met and held its first public session of the year.

What did the FSOC discuss? The FSOC meeting featured commentary on the following:

FSOC priorities. Treasury Secretary Scott Bessent said that part of the FSOC’s work in the coming year will be to revisit past frameworks and determine a new interpretation of financial stability that incorporates economic growth and security, including a focus on resilience of critical financial markets (Treasury fixed income and equity) and infrastructure. The FSOC will also revisit its guidance and approach to nonbank financial company designation.
Bank supervision and regulation. Fed Vice Chair for Supervision Michelle Bowman, OCC Comptroller Jonathan Gould, and Acting FDIC Chairman Travis Hill provided updates on topics including:
- Supervision. All three agency leaders emphasized efforts to refocus supervision on material financial risks rather than procedural compliance, with Gould noting specifically the OCC’s goal of “eliminating ongoing or targeted examination activities that are not related to material financial risks.” Bowman also stated that the Fed would no longer use horizontal exams to “grade on a curve” across banks. Across agencies, officials underscored the need for timely remediation of identified risks from the banks and for more consistent and clear expectations from supervisors. Hill noted several specific changes in progress at the FDIC including amending the supervisory appeals process and modifying enforcement policy to allow termination of enforcement actions when a bank has achieved “substantial compliance.” Aligning to this theme of transparency in the supervisory process, Gould noted that the OCC is working to define key supervisory concepts, like “unsafe and unsound practices,” in regulation.
- Regulatory frameworks. Across their remarks, the agency leaders reiterated their commitment to tailoring requirements to the size, complexity, and risk profile of supervised institutions. Gould stated that the OCC would reassess the regulatory framework for national banks, including whether requirements such as recovery planning and heightened standards remain necessary.
- Bank ratings. The Fed and FDIC highlighted ongoing efforts to revise bank ratings frameworks. Bowman cited the Fed’s proposal to amend the Large Financial Institution (LFI) rating system so that less severe deficiencies in a single area would no longer disproportionately lower a firm’s overall rating. She and Hill also discussed potential changes to the CAMELS framework – which considers Capital Adequacy, Asset Quality, Management, Earnings, Liquidity, and Sensitivity to Market Risk – to emphasize material financial risks rather than procedural compliance.
- Reputation risk and debanking. Gould announced that the agencies are working to formally adjust rules and guidance to prohibit examiners from citing reputational risk as a supervisory concern. Gould also referenced a new bulletin outlining how the agency will consider politicized or unlawful debanking in licensing applications and Community Reinvestment Act (CRA) evaluations, which was issued alongside another bulletin reminding banks of their obligations under the Right to Financial Privacy Act to protect customer records from government-directed surveillance.
- Capital. The Fed confirmed a comprehensive review of the capital framework is underway, with near-term focus on finalizing changes to the enhanced supplementary leverage ratio (eSLR) and stress testing. All three agencies are analyzing potential changes to the community bank leverage ratio (CBLR).
Budget and structure changes. The FSOC approved a budget over 30% lower than the previous year and voted to rescind the charters of committees focused on climate-related financial risk.

What’s next? Bowman said proposals to increase transparency around Fed stress testing models and scenarios would be issued in the coming weeks.

Our Take

Banking agencies advance long-awaited and lasting change

The September meeting underscored a coordinated supervisory reset, with regulators working to embed a more transparent approach into regulations, guidance and ratings frameworks. The OCC’s reassessment of requirements like recovery planning, heightened standards and examinations not related to material financial risks are particularly significant and could materially alter exam schedules and expectations for a wide range of institutions. By narrowing supervision to material financial risks, banks may gain relief from some of the most resource-intensive exam burdens, freeing capacity to reassess and direct resources toward non-financial risk management activities that best align with their strategy and business model. Complementing this shift, the Fed’s move away from horizontal exams and the FDIC’s adjustments to the appeals process and enforcement order terminations reflect a direct response to longstanding industry criticism that supervision has been opaque, overly procedural and slow to resolve. Taken together, these changes suggest that regulators are not just signaling a shift in tone but laying the groundwork for durable reforms that align their focus to material financial risk, while enhancing transparency and predictability.

From practice to policy on debanking

By embedding debanking considerations into rulemaking, licensing, and CRA evaluations, regulators are making sure that limits on reputation risk are durable and enforceable. This shift narrows examiner discretion and provides banks with clearer standards for account management, but it also raises the stakes for documenting risk-based justifications when denying or terminating services. Over time, codifying these boundaries may reduce regulatory uncertainty but could increase political and legal scrutiny of how banks apply their customer acceptance frameworks. Accordingly, firms should continually evaluate their customer acceptance frameworks to ensure decisions are tied to clear, risk-based criteria such as credit, operational, legal, or AML risk, and are documented in a way that can withstand supervisory, legal, or political scrutiny.

What’s the bottom line? Agencies are advancing a fundamental reset of supervision – narrowing oversight to material financial risks, easing procedural burdens, preventing debanking, and increasing transparency.

Digital assets: SEC and CFTC align as market structure bill moves toward consensus

What happened? The following recent notable events happened regarding digital assets:

On September 2nd, the SEC and CFTC issued a joint statement on spot crypto products. Three days later, the agencies on September 5th released another joint statement highlighting future areas of coordination.
On September 9th, a group of twelve Senate Democrats released a digital asset market structure legislation framework.

What does the joint statement on spot crypto products say? In addition to confirming the ability of designated contract markets (DCMs), foreign boards of trade (FBOTs) and national securities exchanges (NSEs) to facilitate crypto trading, including “leveraged, margined and financed transactions.” It also highlights the following list of considerations and encourages market participants to reach out to SEC and CFTC staff with any questions on these topics:

Margin, clearing and settlement;
Monitoring of underlying markets;
Public dissemination of trade data;
Promoting fair and orderly markets; and
Innovation with customer protections.

What does the joint statement on future coordination say? The statement describes regulatory alignment on spot crypto products as a “first step” and highlights the following areas for future action: harmonizing product and venue definitions; streamlining reporting and data standards; aligning capital and margin frameworks; and standing up coordinated innovation exemptions.

What does the market structure legislation framework contain? The framework calls for legislation to address the following areas:

Closing regulatory gaps, including the spot market for digital assets that are not securities. The framework would grant exclusive regulatory jurisdiction in this area to the CFTC and give it registration, oversight and enforcement authority. It would also contain requirements around disclosures, consumer protection and market manipulation, and it would give the CFTC and Fed the authority to regulate credit in digital asset trading.
Clarifying regulatory jurisdiction by requiring the agencies to issue guidance on how securities and commodities laws apply to digital assets. It would also make clear that state anti-fraud and consumer protection laws would not be preempted by legislation and any CFPB authority would not be impacted by legislation.
Address illicit finance risks by requiring platforms to register with FinCEN and comply with BSA obligations; addressing DeFi misuse; and reinforcing sanctions compliance for platforms serving US customers, even if they are domiciled abroad.
Prevent corruption and abuse by limiting elected officials from issuing, endorsing or profiting off of digital assets while in office; clarify that officials must disclosure digital asset holdings; and require promoters of a digital asset to disclose compensation.

What’s next? The agencies will host a roundtable on regulatory harmonization on September 29th. The Senate Democrats’ proposed framework will need to be reconciled with draft legislation from Senate Republicans as well as the House’s CLARITY Act.

Our Take

Doors open wider for broader set of exchanges

The joint staff statement lowers procedural friction for both domestic and foreign exchanges to list spot crypto products, opening the door for more venue optionality for digital asset firms firms who will need to assess which venues and clearing paths best fit their product design, investor base, risk appetite, and surveillance obligations. While the statement invites exchanges and issuers to jump in, it does not provide much detail to provide clarity around regulatory expectations or set up additional guardrails, which will likely come from the upcoming market structure legislation. The Democrats’ framework would give authority to the CFTC and the Fed over credit issues, which will be an important area of focus given the risks associated with customer use of leverage and margin in crypto trading. Firms will need to assess whether they need to enhance their capabilities to perform on-chain and cross-venue surveillance, calibrate margin for 24/7 volatility, and reexamine their liquidity risk management guardrails.

Market structure legislation consensus in sight?

The Senate Democrats’ market structure framework is a sign that they are not too far off from a bipartistan agreement as the broader concepts – including providing the CFTC with oversight over most digital assets – are in line with both the Senate Republicans’ draft legislation and the House’s CLARITY Act. As many of the differences mirror the debate around the GENIUS Act, we expect an eventual reconciled version to look similar, with the Democrats adding clarifications that illicit finance expectations and state consumer protection rules will apply to digital assets but failing to add language prohibiting government officials from certain types of involvement in digital asset issuance or promotion. While details will still need to be worked out to reconcile the framework with Senate Republicans’ draft legislation and the CLARITY Act, clarity for digital asset market structure is closer than ever.

What’s the bottom line? The doors are continuing to open for digital asset activity, with market regulators aligning and market structure legislation moving closer to bipartistan consensus.

On our radar

These notable developments hit our radar recently:

CFTC withdraws proposed operational resilience framework. On September 9th, the CFTC announced the withdrawal of its proposed rule, “Operational Resilience Framework for Futures Commission Merchants, Swap Dealers, and Major Swap Participants.” The agency stated it will reconsider the proposal to ensure better alignment with existing domestic and international resilience standards, signaling a potential shift toward greater regulatory coordination before issuing future requirements.

CFTC withdraws guidance on listing voluntary carbon credit derivative contracts. On September 10th, the CFTC announced it is withdrawing its guidance on the listing of voluntary carbon credit (VCC) derivative contracts. The agency explained that existing requirements under the Commodity Exchange Act and CFTC regulations already provide the framework for listing such products, and that the guidance had created an outsized focus on VCC contracts that risked confusing the broader product listing process.

OCC elevates chartering function, names Stephen Lybarger to new leadership role. On September 9th, the OCC announced the elevation and renaming of its chartering and licensing division as Chartering, Organization and Structure, and appointed Stephen Lybarger, who most recently served as Deputy Comptroller for Licensing, as Senior Deputy Comptroller to lead the function.

Miran advances to full Senate vote. On September 10th, the Senate Banking Committee voted 13-11 to advance the nomination of Stephen Miran to become a Fed Governor for the four month remainder of Ariana Kugler’s term. He could receive a full Senate vote next week.

Senate Banking Committee considers deposit insurance reform. On September 11th, the Senate Banking Committee held a hearing on deposit insurance reform that spotlighted a bipartisan proposal from Senators Alsobrooks (D-MD) and Hagerty (R-TN) to increase the deposit insurance threshold to $20 million for business payment accounts held at banks with under $250 billion in assets. The sponsors argued that targeted reforms would protect small businesses and community banks in the event of another bank failure.