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

December 12, 2025

Change remains a constant in financial services regulation

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

OCC releases preliminary debanking findings

What happened? On December 10th, the OCC released preliminary findings from its review of debanking activities at the nine largest national banks it supervises as part of the implementation of Executive Order (EO) 14331, which directs agencies to address politicized or unlawful debanking.

What are the preliminary findings? The OCC suggested that from 2020 to 2023 many banks restricted or conditioned services for certain industries based on factors unrelated to core financial risks. Specifically:

Customer review policies relied on reputational and values-based criteria. The OCC noted that some banks required escalated review or imposed restrictions on potential or existing customers based on considerations such as public perception, negative media attention, community demonstrations, or labor disputes. The preliminary findings also cited environment-related restrictions in line with the banks’ ESG, corporate responsibility and sustainability reports from 2020-2023.
Certain industry sectors considered higher risk. The OCC cited a number of industries and businesses that faced restrictions or heightened review by banks including fossil fuels, firearms, private prisons, high-cost lenders, tobacco and vaping businesses, adult entertainment, political organizations, and digital asset related activities. The OCC indicated that these restrictions were often tied to concerns about how relationships with these sectors might appear to the public.

What did Comptroller Gould say? In response to the findings Comptroller Gould stated, “It is unfortunate that the nation’s largest banks thought these harmful debanking policies were an appropriate use of their government-granted charter and market power.”

What’s next? The OCC said it will continue reviewing historical account decisions, consumer complaints, and interactions with law enforcement from 2020 through 2025 with an intent “to hold these banks accountable for any unlawful debanking activities, including by making referrals to the Attorney General as required by EO 14331.” The Fed and FDIC are also conducting similar reviews in line with the EO.

Separately, comments on the OCC and FDIC’s proposal to remove reputation risk from supervisory programs are due on December 29th.

Our Take

Application of debanking policy challenges banks’ past and future decision making

The OCC’s preliminary findings emphasize the vigor with which it is prepared to implement the Administration’s policy on debanking. Most notably, the OCC is not only changing course going forward, but it is clearly prepared to look back and apply a new lens and very public scrutiny to what had been standing practice across large banks based on over a decade of supervisory guidance. This shift places institutions in the uncomfortable position of now being asked to account for decisions that were aligned with the guidance and examiner expectations of the time. The findings also surface questions on whether banks retain a prerogative to limit engagement with certain industries based on strategic focus, organizational values, or areas where they have chosen not to build capability. However, it is clear that any remaining standards and policies that explicitly cite controversial industries, negative media, or alignment with the bank’s values are likely to be viewed as problematic going forward.

What should banks do now? Banks should take steps to understand their potential exposure and evaluate a prudent course of action going forward to avoid further public scrutiny. Specifically, banks should consider:

Evaluating historical reviews and decisions. Banks should develop a clear picture of where decisions on escalated reviews, restrictions, and denials have been shaped by heightened-risk industry labels, negative media triggers, or values-based considerations. By reassessing legacy decisions through a risk-based framework, banks can surface inconsistent treatment and consider whether any remedial actions may be warranted.
Further refining customer review and decision frameworks. Although many institutions have already revised customer acceptance frameworks to reflect individualized, risk-based assessments, the OCC’s posture suggests that banks may need to further demonstrate how current policies tie decisions to objective legal, operational risk factors, and especially “core financial risks.” Supervisors will expect institutions to show that similar customers receive similar treatment, that exceptions are well-supported, and that perception-based criteria no longer influence reviews or decisions.
Adjusting strategy. The OCC’s report indicates that there are opportunities for US banks to modify their strategies to provide services and credit to industries for which such engagement was previously discouraged. However, firms that operate globally or have foreign parents may have a complicated task in reconciling home and host country expectations (e.g., around sustainability and related energy lending). Any changes to strategy and customer acceptance policies will need to discuss factors such as core financial risks, strategic objectives, and operational capabilities rather than reputational risk.

OCC approves five national trust charters

What happened? On December 8^th, OCC Comptroller Jonathan Gould spoke at the Blockchain Association Policy Summit, highlighting his priority of reinvigorating de novo bank chartering, including for banks with digital asset strategies. Four days later, the OCC announced conditional approvals for five national trust bank charter applications, all of which include digital asset strategies.

What did Comptroller Gould say about de novo charters? Gould expressed that he is encouraged that efforts to promote more de novo chartering have been working as the OCC has received 14 charter applications in 2025, which is more than the previous four years combined. He explained that the OCC has permitted trust banks to engage in nonfiduciary custody activity for decades and warned that prohibiting them from doing so would undermine innovation in the banking system. He also stated that “confining national trust banks to the technologies of the past” would be a “recipe for irrelevance.”

What conditions did the OCC impose as part of its approvals? The approvals broadly required applicants to limit their activities to those of a trust bank, comply with GENIUS Act and implementing regulations, provide 60 days notice if they intend to deviate from their business plan, maintain a prescribed amount of tier 1 capital with at least 50% in Eligible Liquid Assets, and maintain 180 days of operating expenses in Eligible Liquid Assets. The OCC conditioned one application approval on the firm setting funds aside to invest in its compliance program and address a consent order.

Our Take

Five charter approvals, one regulatory message

The OCC is providing direct support to the growth of digital assets consistent with the Administration’s pro-crypto agenda. Notably, it is providing access to a broad spectrum of market participants from traditional financial institutions to startups. However, the OCC’s willingness to grant charters comes with expectations around capital, liquidity, governance, risk management, and BSA/AML compliance. Conditional approval is not just a license to operate — it is a green light to begin building in an emerging regulatory environment. Ultimately, the firms that succeed will be those that pair innovation with strong financials, operational discipline, and effective compliance infrastructure from day one.

Trust charters have emerged as an attractive option for digital assets firms as they would allow them to issue stablecoins and custody assets but would not require forming a Bank Holding Company or obtaining FDIC insurance. Adding to the momentum is the Fed’s upcoming “skinny master account” proposal, which would make the trust charter route more attractive by providing a significantly streamlined path for trust banks to obtain access to the Fed’s payment and settlement infrastructure (see Our Take here for more).

FSOC meets and issues new annual report

What happened? On December 11^th, Treasury Secretary Scott Bessent hosted the latest quarterly meeting of the Financial Stability Oversight Council (FSOC), which included the release of its 2025 annual report and statements by member regulators.

What does the annual FSOC report say? In a new opening statement to the annual report, Secretary Bessent announced an overhaul of the Council’s structure and priorities, directing FSOC to move away from broad, vulnerability-focused assessments and toward identifying regulatory and supervisory policies that may impede economic growth. Specific changes include:

Reframing financial stability around economic growth and regulation: FSOC’s report elevates economic growth and economic security as central elements of financial stability, shifting the Council away from its prior vulnerability-mapping approach and toward assessing whether regulatory and supervisory regimes impose undue impediments to market functioning.
Establishing new interagency committees: The report formalizes four new working groups — Market Resilience, Household Resilience, Artificial Intelligence, and Crisis Preparedness — each positioned to identify key priorities and coordinate member-agency efforts through the Administration’s growth-oriented lens.
Restructuring the annual report to foreground policy initiatives: Where earlier reports led with systemic vulnerabilities, this year’s report places policy priorities and committee workstreams first. The discussion of potential market risks appears later in the document and carries fewer prescriptive recommendations than in prior years.
Reducing emphasis on cross-sector vulnerabilities: The report moves away from describing a broad range of market conditions as potential financial-stability concerns, opting instead for a narrower set of issues tied to the Council’s new priorities and working-group focus areas.

What’s next? The FSOC is expected to meet again in Q1 2026.

Our Take

FSOC shifts its focus from broad vulnerability mapping to regulatory recalibration

FSOC’s annual report reflects a meaningful shift in how the Council interprets financial stability, moving away from its traditional role of cataloging risks across markets and institutions and toward a framework that treats economic growth as a top priority and regulatory and supervisory burden as potential impediments. By reorganizing the report around new working groups on market resilience, household resilience, AI, and crisis preparedness centered on cyber attacks and critical service provider disruptions, FSOC has changed the focus of its risk monitoring activities, placing greater emphasis on refining conditions that support capital formation, market functioning, consumer financial health, and US technology leadership. At the same time, the focus of the crisis preparedness committee shows that the FSOC recognizes that efforts to streamline regulation and promote innovation must be accompanied by safeguards that ensure new tools, infrastructures and market participants operate in a safe and resilient manner.

On our radar

These notable developments hit our radar recently:

Agencies clear the way for expanded digital assets activities. This week, regulators advanced several initiatives affecting digital asset markets. On December 8th, the CFTC announced the launch of a pilot program permitting certain digital assets to be used as collateral in derivatives markets and issued guidance reminding firms to limit accepted collateral to liquid assets with established haircuts. On December 9th, the OCC clarified that banks may conduct riskless principal crypto-asset transactions. On December 11th, the SEC issued a no-action letter enabling the Depository Trust Company to proceed with a preliminary digital assets initiative, and the CFTC withdrew its 2020 “actual delivery” guidance as outdated and signaled plans to reassess the standard.

California advances climate disclosure rules. On December 9^th, the California Air Resources Board (CARB) released draft regulations to begin implementing the state’s 2023 climate-related disclosure statutes, SB 253 (Climate Corporate Data Accountability Act) and SB 261 (Climate-Related Financial Risk Act). The proposal would require companies with at least $1 billion in annual revenue doing business in California to begin reporting Scope 1 and Scope 2 emissions by August 10th, 2026, with Scope 3 reporting deferred until 2027. The release opens a 45-day public comment period, with the CARB Board scheduled to vote on February 26th. Litigation continues in parallel: a federal appeals court has temporarily halted SB 261, while allowing SB 253 to proceed.

CFPB reports rising BNPL usage alongside declining charge offs and late fees. On December 11th, the CFPB released a data spotlight showing that Pay in 4 BNPL loan volumes rose 23% in 2023 to $336 million loans totaling $45.2 billion, though the bureau noted this growth has begun to slow as the market matures. The report also found that consumers are taking more loans per lender each year and higher annual loan amounts, while late fee incidence fell from 5.2% to 4.1% and charge offs declined to 1.83%, reaching their lowest level as a share of volume in five years.

BCBS issues third-party risk management principles. On December 10^th, the Basel Committee on Banking Supervision issued new principles for the sound management of third-party risk. The principles expand prior outsourcing guidance into a full life-cycle framework that covers a broad range of third-party and supply-chain dependencies, including intragroup providers and key nth-party relationships. The principles call for banks to maintain comprehensive third-party registers, assess concentration risk, enhance due diligence and contracting expectations for critical services, and integrate third-party arrangements into operational resilience planning.

FDIC finalizes revisions to the FFIEC 031 Call Report to align with new capital requirements. On December 11th, the Fed, FDIC, and OCC finalized changes to the FFIEC 031 Call Report to implement the agencies’ December 1st final capital rule modifying enhanced supplementary leverage ratio standards for US GSIBs and their subsidiary depository institutions. The FFIEC 041 and 051 Call Reports were reapproved without revision, while the updated FFIEC 031 requirements will take effect for the June 30th, 2026 report date, with supplemental instructions planned for institutions that early adopt the capital rule before April 1st, 2026.

SEC announces agenda for roundtable on potential changes to Regulation NMS trade-through and related rules. On December 10th, the SEC released the agenda for its December 16th roundtable examining potential modifications to Rule 611 of Regulation NMS and the implications for related provisions, including access requirements and fee caps under Rule 610 and key defined terms and market data structures under Rule 600. The roundtable will also discuss how revisions to the trade-through rule could affect best-execution obligations and whether additional guidance for broker-dealers would be needed.

CFTC advances Treasury-market reforms, reporting relief, and cross-border clarity. This week, the CFTC:

Issued a proposed order to allow customer-level cross-margining between CME and the Fixed Income Clearing Corporation, aiming to support the SEC’s Treasury-clearing mandate by improving liquidity and risk offsets across futures and cash Treasuries. Comments are due 30 days after publication.
Issued no-action letters providing limited relief from swap-data reporting and recordkeeping requirements for certain binary and event contracts listed on registered entities.
Issued a no-action letter allowing firms to rely on the 2020 Cross-Border Rule’s definition of “U.S. person” across swap-dealer registration, margin, and reporting requirements, replacing a patchwork of older interpretations and aligning with the SEC framework.

House Financial Services Committee holds hearings on AI innovation and bank capital reform. On December 10th, the full Committee held a hearing on the application of artificial intelligence in financial services and housing markets, assessing how existing regulatory frameworks apply to emerging AI use cases and where gaps may hinder responsible innovation. The discussion also reviewed proposed legislation to establish regulatory sandboxes, address AI-enabled financial crimes, and modernize supervisory technology. The following day, on December 11th, the Subcommittee on Financial Institutions examined potential recalibration of the U.S. bank capital framework, including efforts by the FDIC, OCC, and Federal Reserve to simplify and tailor capital standards for large institutions and options for providing capital relief to community banks.