Our Take: financial services regulatory update – October 31, 2025

October 31, 2025

Change remains a constant in financial services regulation

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

OCC rescinds recovery planning expansion

What happened? On October 27^th, the OCC issued a proposed rule to rescind its guidelines for recovery planning. The original 2016 guidelines applied to institutions with over $50 billion in assets. This threshold was increased to $250 billion in 2018 and reduced to $100 billion in 2024.

What requirements have been rescinded? The proposal would eliminate recovery planning expectations for all OCC-regulated institutions, including those with over $250 billion in total consolidated assets. Requirements that would be rescinded include:

Maintaining and submitting a recovery plan that identifies a full range of options for responding to financial stress

Establishing triggers for early warning indicators across capital, liquidity, and other metrics
Integrating recovery planning into risk governance frameworks and board oversight
Conducting plan testing and scenario analysis

What requirements remain? The OCC emphasized that its broader expectations around resilience and risk management remain applicable to all large institutions, regardless of the outcome of this specific rulemaking. In addition, the Fed’s recovery planning expectations remain in effect for bank holding companies (BHCs) and intermediate holding companies (IHCs) with over $250 billion in assets.

What’s next? Comments will be due 30 days after the proposal is published in the Federal Register.

What’s next? Comments on the proposed 2026 stress test scenarios are due by December 1^st, 2025 and comments on the policy amendment proposal, supervisory model documentation and proposed 2026 model changes are due by January 22^nd, 2026.

Our Take

A compliance burden removed with more likely to come

The OCC’s proposal eliminates a formal requirement that, while well-intentioned, has haunted the industry as a resource-intensive exercise that is often duplicative for large banks. Recovery planning frequently ran in parallel to other risk and liquidity exercises such as contingency funding plans, capital planning, and enterprise stress testing. With separate recovery plans removed, institutions can refocus their efforts on the tools that directly support resilience to stress without maintaining a standalone framework. Given that Comptroller Jonathan Gould stated in September that the OCC would reassess “the need for things like recovery planning and heightened standards,” this proposal may not be the end of the OCC’s requirement rescissions. Institutions should prepare for continued rationalization of regulatory frameworks and use this opportunity to assess how resources devoted to these exercises can be repurposed — offering a potential regulatory dividend that supports broader risk and business priorities.

What’s the bottom line? The proposal is a strong step in the direction of streamlining requirements and may be a sign of more to come.

Mike Selig nominated to lead CFTC

What happened? On October 25^th, Mike Selig was nominated by the President to serve as CFTC Chair. He stated that he intends to (1) support well-functioning commodity markets; (2) promote freedom, competition and innovation; and (3) “make the United States the Crypto Capital of the World.”

What is Selig’s background? Selig is currently the General Counsel of the SEC’s Crypto Task Force, where he also serves as a senior advisor to Chair Paul Atkins. He has also served as a partner at a large law firm and in the legal department at the CFTC.

What’s next? He will need to have a confirmation hearing with the Senate Agriculture Committee, which may be delayed given the ongoing government shutdown. Current Acting Chair Caroline Pham has stated that she will leave the agency once a successor is confirmed.

Our Take

CFTC to go full steam ahead with the Administration’s pro-crypto and innovation agenda

Selig’s track record of advocating for pro-crypto policies and pledge to make the US “the crypto capital of the world” means that, if confirmed, he will be focused on providing clear rules of the road for digital asset activities and ending “regulation-by-enforcement.” This will likely include (a) clarifying asset classification through interpretive guidance; (b) easing the path for registered crypto market participants by streamlining registration processes and developing a lighter-touch compliance regime tailored toward unique crypto risks; (c) working with the industry to develop a supervisory regime for DeFi activities; and (d) prioritizing enforcement to focus on fraud, market manipulation and misappropriation of customer assets. He will also likely take a permissive approach to areas such as perpetual futures and prediction markets, both of which have been frequently-discussed but unresolved issues for the market regulators.

More market regulator coordination to come

Considering his background at the SEC and history of working closely with SEC Chair Paul Atkins, Selig will likely strengthen alignment between the two agencies. While the primary area of focus will likely be crypto asset classification and supervision, we will also likely see a focus on dual registration of swap and security-based swap (SBS) dealers, with implications for joint enforcement and supervisory coordination.

The CFTC’s Commission will be filled as the agency’s role expands

Selig’s nomination comes as the agency is poised to expand its role in crypto and innovation, especially as the CLARITY Act still winding its way through Congress would explicitly give it jurisdiction over the majority of crypto assets. At the same time, the CFTC’s leadership has been a bit of a ghost town – with only Acting Chair Caroline Pham remaining at the five-member Committee. We expect to see further nominations to fill the commission fill following Selig’s confirmation, and as new commissioners join the ranks, the CFTC will undergo a full transformation – swapping caution for clarity, and indecision for action. Firms should prepare for a new pace as the Commission steps out of the shadows and into a leadership role on digital assets and innovation.

What’s the bottom line? If confirmed, Mike Selig will lead the agency to provide clear rules of the road for crypto, end “regulation-by-enforcement,” and support a pro-innovation agenda.

CFPB reverses stance on FCRA preemption

What happened? On October 28^th, the CFPB issued an interpretive rule clarifying that the Fair Credit Reporting Act (FCRA) broadly preempts all state laws relating to the regulation of consumer reporting. The agency emphasized congressional intent to create a uniform national standard for credit reporting.

What does the interpretive rule change? The rule replaces a previous 2022 interpretive rule finding that the preemption language in the FCRA applies more narrowly to certain areas specifically elucidated in the Act, leaving open other areas such as medical debt and arrest records to state regulation.

What’s next? The interpretive rule takes effect immediately.

Our Take

Federal preemption returns – but so does judicial scrutiny

The CFPB’s move to broaden federal FCRA preemption comes as several states including New York, California and Colorado have moved aggressively to regulate the content and use of credit reports, particularly in areas such as medical debt, criminal records, and rental history. The new interpretive rule will be used to support challenges to state requirements and limitations, but it does not solve the immediate problem of maintaining compliance with a growing patchwork of laws. Moreover, the impact of the interpretation may be limited given the Supreme Court’s decision last year to overturn “Chevron deference,” which had required that courts defer to agencies’ “reasonable” interpretations of ambiguous statutory language. As a result, expect continuing challenges within the federal courts and a continued variety of state level requirements unless Congress or the Supreme Court more clearly weigh in on the issue of FCRA preemption.

What’s the bottom line? The CFPB’s rule seeks to limit states’ attempts to regulate credit reporting, but its impacted may be limited given recent administrative law changes.

NAIC remains gridlocked on AI regulation

What happened? On October 9^th, Wisconsin Insurance Commissioner Nathan Houdek stated that National Association of Insurance Commissioners (NAIC) members remain split on whether to pursue a model law governing insurers' use of AI. At a September 29 interim meeting of the NAIC’s Big Data and AI Working Group, several regulators voiced concern about the lack of standardized disclosure requirements and the limitations of the 2023 AI Model Bulletin, which set out principles for responsible AI use, including requirements for governance frameworks and adverse outcome mitigation.

Where do things stand now? Only 24 jurisdictions have adopted requirements based on the 2023 bulletin, but some states like Colorado, California, New York, Texas, and Vermont are taking independent steps to implement their own AI-related disclosure and oversight frameworks. The NAIC is also finalizing a new AI Systems Evaluation Tool, which includes structured questionnaires to help regulators assess insurers' AI usage. The 60-day public comment period for the tool closed in early September.

What’s next? The NAIC Big Data and AI Working Group will continue discussions through the end of 2025 on whether to proceed with a model law. Final guidance on the AI Systems Evaluation Tool is expected before year-end.

Our Take

Without NAIC consensus, insurers face deepening regulatory fragmentation

With NAIC agreement on a model AI law still elusive, the tension between state autonomy and the association’s mission of regulatory harmonization is coming into sharp focus. Insurers already face a frighteningly fragmented compliance environment — and that fragmentation is poised to grow as more states, including Colorado and New York, advance their own AI-specific rules. In response, some insurers are building dedicated AI governance structures, embedding risk-tiering frameworks, and extending model risk, privacy, and data governance protocols to cover emerging use cases. In other states, the growing use of generative AI, coupled with concerns related to bias, explainability, and third-party risk, continues to test the adequacy of existing oversight structures. In the absence of a uniform supervisory framework, firms should continue aligning their AI governance programs with the principles of the 2023 Model Bulletin — both to manage near-term state-by-state obligations and to build a scalable foundation for future compliance.

What’s the bottom line? As technology outpaces regulation, insurers are left navigating a complex environment shaped more by state action than national alignment.

On our radar

These notable developments hit our radar recently:

SEC Chair Atkins issues statement on phase-in termination date for the de minimis exception. On October 29th, SEC Chairman Paul Atkins issued a statement regarding the phase-in termination date for the de minimis exception to the security-based swap dealer definition. The current phase-in period is set to expire on November 8, 2026, triggering lower registration thresholds for certain swap activities beginning November 8, 2025.

OCC Comptroller Gould to discuss future of banking and financial services at policy event. On November 6th, Comptroller Jonathan Gould will speak at the Women in Housing & Finance Public Policy Lunch on issues shaping the future of banking and financial services. He is planning to cover the OCC’s supervisory priorities, the evolving landscape of bank-fintech partnerships, and the role of innovation and technology in ensuring a safe, sound, fair, and competitive financial system. The event will be held in a hybrid format from 12:00 to 1:00 p.m. EST.

CFPB withdraws proposed rule on the use of form contracts by nonbanks. On October 29th, the CFPB withdrew its 2023 proposal to require supervised nonbanks to register form contract terms that limit consumer legal protections. The Bureau cited high compliance costs, uncertain benefits, and resource constraints as reasons that it will take no further action on the 2023 proposed rule.

Federal judge pauses CFPB “open banking” rules. On October. 29th, a federal judge in the Eastern District of Kentucky granted a preliminary injunction temporarily pausing compliance with the CFPB’s Personal Financial Data Rights Rule also known as the “open banking” rules while the agency considers new rulemaking. The court found that the plaintiffs, including Forcht Bank, the Kentucky Bankers Association, and the Bank Policy Institute, are likely to succeed in arguing that the CFPB exceeded its statutory authority under Dodd-Frank Section 1033. The injunction remains in place until the CFPB completes its reconsideration.

Hill has confirmation hearing. On October 30th, the Senate Banking Committee held a confirmation hearing for Travis Hill, who has served as Acting FDIC Chair since January and is now nominated to lead the agency permanently. Hill reiterated his intent to pursue regulatory reform and tiered supervision. He also expressed general support for proposed changes to deposit insurance coverage, while stopping short of endorsing any specific legislation. Senator Elizabeth Warren (D-MA) challenged Hill over deregulation and FDIC examiner staffing levels while Senator John Kennedy (R-LA) said he may withhold support over the agency’s response to workplace misconduct and asked for a formal accountability report within 30 days.