Our Take: financial services regulatory update – September 26, 2025

September 26, 2025

Change remains a constant in financial services regulation

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

Barr and Bowman speak

What happened? On September 25^th, Fed Vice Chair for Supervision Michelle Bowman and Fed Governor Michael Barr delivered separate remarks outlining their perspectives on key regulatory priorities.

What did they say?

Bowman answered questions of a variety of topics and she:
- Indicated that the Fed, OCC and FDIC are targeting a re-proposal of Basel III Endgame at the end of 2025 or early 2026, with a goal of finalizing and implementing the rule before 2028
- Stated that the Fed is conducting an additional post-mortem review of the Silicon Valley Bank (SVB) failure, with a focus on whether supervision adequately captured actual risk exposures
- Discussed the need for rightsizing regulatory requirements and reviewing thresholds including $10 billion and $100 billion to ensure they do not create unintended barriers to growth or mergers
- Confirmed that the Fed aims to finalize by year-end proposed revisions to the Large Financial Institution (LFI) ratings framework, which would allow firms to retain “well managed” status if only one of its three component ratings is "Deficient-1”
- Confirmed that the Fed is working with other members of the Federal Financial Institutions Examination Council (FFIEC) to review the Capital adequacy, Asset quality, Management, Earnings, Liquidity, and Sensitivity to market risk (CAMELS) bank rating framework, though she said she would not expect this to result in major changes to bank CAMELS ratings
Barr primarily discussed stress testing and he:
- Expressed his opposition to the Fed’s April 2025 proposal to average stress test losses over two years when calculating the Stress Capital Buffer (SCB),[1] arguing that that averaging results would diminish the test’s sensitivity to emerging risks
- Expressed concern about the Fed’s response to ongoing litigation, which includes a commitment to release stress test models and scenarios for public comment, arguing that subjecting models to the notice-and-comment process could encourage gaming the test
- Proposed decoupling the SCB from stress test results and instead returning to standardized capital buffers set through regulation, with the option to impose additional capital requirements on specific firms, where warranted

What’s next? Under a joint motion to stay an industry lawsuit against its stress testing framework, the Fed stated its intent to disclose its supervisory stress test models, propose a notice-and-comment process for annual scenarios and material model changes, and revise the scenario design framework by September 30th. However, the stay has since been extended to October 15th.

Our Take

Bowman is steering the Fed’s pro-growth regulatory agenda

While Barr is publicizing the views he is undoubtedly expressing in internal Fed discussions, Bowman now leads the Fed’s supervision and regulation efforts, and her policy priorities are defining the path forward. Bowman’s remarks reinforce a regulatory agenda centered on a transparent and tailored supervisory process that helps rather than hinders economic growth. Her focus on modernizing ratings frameworks and revisiting thresholds signals a shift away from triggers and designations that may constrain institutions that are effectively managing core financial risks. The forthcoming SVB review that Bowman announced is likely to further support efforts to redirect supervisory resources toward management of material financial risks, including interest rate, liquidity, and funding exposures that she has argued were underweighted in SVB’s supervision.

In contrast to Barr’s concerns about model and scenario design release reducing the supervisory value of stress testing, Bowman has long been supportive of changes that embed clarity and predictability into the stress testing process – even before the ongoing lawsuit. She will likely continue to push for reforms to stress testing and other Fed requirements that favor transparency over opaque supervisory discretion. This transparency will enable firms to compare internal assumptions to regulatory approaches with more clarity than ever before, identify drivers of differences in results, and better predict the Fed’s stress loss consumption. Rather than treating stress testing as a reactive exercise, firms will be able to build more durable, data-driven capital frameworks that account for internal risk views and supervisory logic. This transparency may ultimately reduce capital friction and support more confident strategic execution.

What’s the bottom line?

Bowman is shifting the Fed’s supervision and regulation toward a growth-oriented agenda favoring transparency and predictability.

On our radar

These notable developments hit our radar recently:

House Oversight Committee expands investigation into potential political discrimination in financial services. On September 18th, House Oversight Committee Chairman James Comer (R-KY) announced an expansion of the Committee’s investigation into politically motivated practices in the financial system, including alleged debanking, insurance cancellations and ESG-related proxy activity. Comer is seeking information from regulators, including the SEC and IRS, and private organizations on whether financial institutions are denying services or misusing client assets to advance political agendas.

SEC Chair Atkins on disclosures and innovation. On September 23^rd, SEC Chair Paul Atkins in an interview discussed priorities including harmonization with the CFTC, proposing an innovation exemption to allow digital asset exchanges to list crypto-based exchange-traded products, and increasing opportunities for retail investors to access alternative assets.

SEC announces agenda and panelists for harmonization conference with CFTC. On September 29^th, the SEC will host a roundtable covering the history of the SEC/CFTC relationship and benefits of harmonization, featuring commissioners from both agencies and the industry.

California finalizes rules covering audits, risk assessments, and AI. On September 23rd, the California Privacy Protection Agency (CPPA) announced final regulations covering cybersecurity audits, risk assessments and automated decision-making technology (ADMT). Large businesses must submit audit certifications beginning April 2028, while risk assessment attestation and summary reporting begins in 2028. ADMT requirements take effect January 1st, 2027.

SEC seeks public input on improving RMBS and ABS rules. On September 26th, the SEC issued a concept release inviting public comment on whether current regulations are impeding residential mortgage-backed securities (RMBS) offerings, which have not occurred publicly since 2013. The Commission is seeking feedback on disclosure requirements, privacy concerns, and potential changes to regulatory definitions affecting both RMBS and asset-backed securities (ABS).

California releases preliminary list of companies subject to climate disclosure laws. On September 25th, the California Air Resources Board (CARB) published a preliminary list of 4,159 companies that may be subject to new disclosure requirements under Climate Corporate Data Accountability Act (SB 253) and Climate‑Related Financial Risk Act (SB 261). CARB is seeking feedback from entities before finalizing the list, which is based on data from March 2022.

Fed to host community banking conference on October 9. The Fed will host a community bank-focused conference in Washington, D.C. on October 9th, with topics including payments innovation, tailoring capital and liquidity standards, perspectives on the economy and evolving financial landscape and more. Representatives will include CEOs from community banks and private equity companies.

Bank regulators scrutinizing past debanking practices. Reports have indicated that the OCC has sent letters to large banks requesting information on whether they have denied services or closed accounts due to political or reputational risk factors. This follows similar letters sent by the SBA in late August. The FDIC is expected to issue similar letters in the coming weeks.

¹_{The SCB is a firm-specific capital buffer that reflects projected losses from the Fed’s severely adverse stress scenario, plus four quarters of planned common stock dividends. The SCB is added to minimum capital requirements and replaced the static 2.5% capital conservation buffer.}