Monthly Bank Regulatory Report (April 2025)

Client Alert | May 1, 2025

We are pleased to provide you with the April edition of Gibson Dunn’s monthly U.S. bank regulatory update. Please feel free to reach out to us to discuss any of the below topics further.

KEY TAKEAWAYS

The federal banking agencies continue to revisit their approach to digital asset- and blockchain-related activities.
- The Board of Governors of the Federal Reserve System (Federal Reserve) rescinded (i) SR 22-6, which established an expectation that state member banks notify the Federal Reserve prior to engaging in crypto-asset-related activities and (ii) SR 23-8, which required state member banks to obtain written supervisory nonobjection prior to engaging in certain “dollar token” activities.
- The Federal Reserve and Federal Deposit Insurance Corporation (FDIC) withdrew from the “Joint Statement on Crypto-Asset Risks to Banking Organizations” (Jan. 3, 2023) and the “Joint Statement on Liquidity Risks to Banking Organizations Resulting from Crypto-Asset Market Vulnerabilities” (Feb. 23, 2023), joining the Office of the Comptroller of the Currency (OCC) which had previously withdrawn on March 7, 2025.
- The most recent actions by the Federal Reserve and FDIC now generally align the three federal banking agencies on crypto-related activities, no longer requiring institutions to receive nonobjection prior to engaging in certain crypto-related activities.
- As noted in the FDIC’s release announcing its withdrawal, the agencies “are exploring issuing additional clarity with respect to banking organizations’ crypto-asset and related activities in the coming weeks and months.”
Acting Chairman Travis Hill highlighted key policy issues in focus by the FDIC, including encouraging de novo bank formation, revamping the FDIC’s approach to digital assets and blockchain-related activities (see above), resolution planning and the failed bank resolution process (see below), and reevaluating quantitative asset thresholds in FDIC regulations.
The Federal Reserve requested comment on a proposal to reduce the volatility of the capital requirements stemming from the Federal Reserve’s annual stress test, consistent with its December 23, 2024 announcement and the December 24, 2024 suit challenging the legality of the current the stress testing framework.

DEEPER DIVES

Federal Reserve and FDIC Withdraw Guidance on Certain Crypto-Related Activities to Align with OCC. On April 24, 2025, the Federal Reserve announced the withdrawal of guidance related to crypto-asset and dollar token activities and related changes to the Federal Reserve’s supervisory expectations. The Federal Reserve rescinded both SR 22-6 establishing that state member banks should notify the Federal Reserve prior to engaging in crypto-asset-related activities and SR 23-8 requiring state member banks to obtain written supervisory nonobjection prior to engaging in certain “dollar token” activities. On the same date, the Federal Reserve and the FDIC also withdrew two other joint interagency statements that addressed crypto-asset risks and liquidity risks stemming from crypto-asset market vulnerabilities. The Federal Reserve did not issue replacement guidance, but stated that the change ensures that the Federal Reserve’s “expectations remain aligned with evolving risks and further support innovation in the banking system,” and committed to working with the agencies to consider whether additional guidance is appropriate. Similarly, the FDIC noted it is exploring issuing additional clarity with respect to banking organizations’ crypto-asset and related activities in the future.

Insights. As we have previously highlighted, the federal banking agencies continue to signal increased receptivity to crypto-related activities and digital assets. Coupled with the OCC and FDIC’s related actions last month, the withdrawal and rescission of additional guidance from the Biden Administration serves as the latest of many incremental steps toward a regulatory environment that is more accepting of crypto- and blockchain-related activities and product offerings.

As noted by Acting Chairman Hill in his April 8, 2025 update on key policy issues, “one specific area that merits attention is the use of public, permissionless blockchains by banks.” The Federal Reserve’s Policy Statement on Section 9(13) of the Federal Reserve Act notes in the preamble to the final rule that the Federal Reserve “generally believes that issuing tokens on open, public, and/or decentralized networks, or similar systems is highly likely to be inconsistent with safe and sound banking practices.” At this time, there is no indication the Federal Reserve’s Policy Statement on Section 9(13) of the Federal Reserve Act is under consideration for amendment or reversal through a subsequent rulemaking process.

In addition, other crypto-related activities and product offerings may present thorny legal authority/permissibility issues under law or raise safety and soundness concerns, all of which must continue to be evaluated by institutions. In practice, banks are still expected to engage with the Federal Reserve, FDIC and OCC regarding proposed crypto-related activities.

Acting Chairman Hill Provides an Update on Key Policy Issues. On April 8, 2025, Acting Chairman Hill highlighted key policy issues in focus by the FDIC, including encouraging de novo bank formation, revamping the FDIC’s approach to digital assets and blockchain-related activities, resolution planning and the failed bank resolution process, and reevaluating quantitative asset thresholds in FDIC regulations. With respect to de novo bank formation, Acting Chairman Hill described the de novo rate as having “fallen off a cliff.” He noted that the FDIC is considering whether there are scenarios that could warrant adjusted standards, including with respect to up-front and ongoing capital expectations for noncomplex, community banks, or adjustments to deposit insurance applications for innovative business models. He also noted that the FDIC is actively working on a request for information to ask “a comprehensive set of questions addressing issues related to ILC [industrial loan company] applications.”

He also referenced “just a few” of the issues that the FDIC is considering with respect its approach to digital assets and blockchain-related activities, noting that the FDIC expects to issue additional guidance on particular crypto-related activities and raised the prospect of whether the agency “should [] more comprehensively identify which crypto-related activities are permissible.” He highlighted the use of public, permissionless blockchains by banks as an area where additional guidance could be forthcoming, particularly in light of the withdrawal by the FDIC from the aforementioned interagency letters (see above).

On reevaluating rules’ quantitative asset thresholds, he noted the agency has been “inventorying and analyzing the dozens of numerical thresholds used by the FDIC” and “considering different options for indexing and the impact those options would have.” He called out two specific thresholds in his remarks – $100 billion and $10 billion, noting in particular that “while some uses of the $10 billion threshold are statutory, others exist at regulators’ discretion.”

Insights. The statements by Acting Chairman Hill represent a tonal change that may result in a substantial shift to legacy FDIC positions. His comments on de novos and ILCs raise potential options to consider for potential de novo community and regional banks and for fintechs that want to engage in limited banking activities, respectively. As noted above, the consistent refrain on digital assets and blockchain technology suggests that guidance will be forthcoming in the near future, but coordination and practicality will be critical.

The FDIC Revises Approach to Resolution Planning for Large Banks. In his April 8, 2025 key policy updates, Acting Chairman Hill also identified the FDIC’s work on resolution planning and the failed bank resolution process. Shortly thereafter, on April 18, 2025, the FDIC announced changes in its approach to resolution planning and issued responses to Frequently Asked Questions (FAQs) regarding IDI Resolution Planning. According to Acting Chairman Hill, the changes “deemphasize and broaden the ‘strategy’ discussion and waive the expectation that banks identify and build their plans around a hypothetical failure scenario,” to better focus instead on providing the FDIC the information it would need to rapidly sell a bank and, if needed, operate the institution for a short period of time.

Insights. Those changes align with Acting Chairman Hill’s discussion of resolution planning in his key policy updates. On resolution planning, he also noted: (i) for large institution resolutions, the FDIC’s “primary goal should be maximizing the likelihood of the optimal resolution option, which experience has demonstrated to generally be a weekend sale”; and (ii) the FDIC plans “to engage in outreach with large institutions in their capacity as potential acquirers” and engage with potential nonbank bidders “to facilitate their ability both to partner with banks on bids and to bid individually on particular asset pools.”

The OCC Restructures Supervision and Other Functions. On April 16, the OCC announced that effective June 2, 2025, the agency will: (1) combine the Midsize and Community Bank Supervision and Large Bank Supervision functions within a Bank Supervision and Enforcement Division; (2) reinstate the Chief National Bank Examiner office and both the Bank of Supervision Policy and Supervision Risk and Analysis divisions therein; and (3) elevate the Information Technology and Security function.

Insights. According to the OCC, the reorganization is intended to promote the seamless sharing of expertise and resources to address bank-specific issues or novel needs, both in practice and in approach. The streamlined structure accompanies reports from earlier this year of a hiring freeze and layoffs within the OCC, and midsize and community bank group specifically, consistent with efforts across the federal government. It is not clear whether or how the organizational change may impact existing supervisory teams, though banks on the cusp of growing into the Large Bank Supervision group may experience increased continuity if their supervisory teams remain the same as the institution grows. The announcement also comes after the OCC reported a “major security incident” to Congress earlier this month, and the elevation of the Information Technology and Security function may be an attempt to calm concerns within the industry regarding the safety of proprietary and customer information at the agency.

OTHER NOTABLE ITEMS

Federal Reserve Requests Comments on Proposal Regarding Stress Capital Buffer Requirements. On April 17, 2025, the Fed issued a proposal for comment aimed at reducing the volatility of capital requirements stemming from stress testing. The proposal is consistent with its December 23, 2024 announcement and the December 24, 2024 suit challenging the legality of the current the stress testing framework. In its announcement, the Federal Reserve also previewed that later this year, it will propose additional changes to improve the transparency of the stress test, including disclosing and seeking public comment on the models that determine the hypothetical losses and revenue of banks under stress and ensuring that the public can comment on the hypothetical scenarios used for the annual stress test before the scenarios are finalize—also consistent with the December 2024 announcement and suit.

Federal Reserve Board Publishes Financial Stability Report. On April 25, 2025, the Federal Reserve published its semi-annual Financial Stability Report. According to the Federal Reserve Bank of New York’s industry survey, there was a meaningful increase relative to its fall 2024 survey in the percentage of respondents citing risks emanating from changes to global trade policy as their top risk to financial stability, with moderate increases in the percentage of respondents citing policy uncertainty, persistent inflation, corrections in asset markets and Treasury market functioning as top risks to financial stability, with a moderate decline in the percentage of respondents citing U.S. fiscal debt sustainability as a top risk to financial stability—though it did remain at 50%.

Acting Comptroller Hood Address Areas of Strategic Focus. On April 16, 2025, Acting Comptroller Hood gave remarks before the Exchequer Club in which he expanded on his four key areas of strategic focus for the OCC: (1) reducing regulatory burden (“regulations must be effective, not excessive”); (2) promoting financial inclusion (“financial inclusion is the civil rights issue of our time”); (3) embracing bank-fintech partnerships (“innovation is not optional—it is essential”); and (4) expanding responsible bank activities involving digital assets (“Interpretive Letter 1183 confirms that national banks may engage in certain digital asset activities, provided they do so safely and soundly and under appropriate risk management standards”).

Speech by Governor Barr on AI, Fintechs and Banks. On April 4, 2025, Federal Reserve Board Governor Barr gave a speech titled “AI, Fintechs, and Banks.” In his speech, Governor Barr discussed innovation in the context of generative artificial intelligence (Gen AI) in banking and how bank–fintech partnerships may accelerate the integration of the technology and banking. He advised that bank risk managers and regulators should monitor developments outside the bank perimeter so that they are not caught off guard as this technology quickly enters the banking system, the importance of an appropriate incentive structure, and the unique role of fintechs in “laying the groundwork for good risk management of Gen AI.”

Speech by Governor Barr on AI and Cybersecurity. On April 17, 2025, Federal Reserve Board Governor Barr gave a speech titled “Deepfakes and the AI Arms Race in Bank Cybersecurity.” In his speech, Governor Barr addressed how generative AI has the potential to enable deepfake technology and “supercharge identity fraud.” Governor Barr emphasized the role of “strong, resilient financial institutions in preventing attacks” and advocated for bank controls to evolve in kind with AI-powered advances by, for example, adapting facial recognition, voice analysis and behavioral biometrics to detect potential deepfakes, among other controls. He also advocated for updated guidance and regulation, use of AI technologies by banking regulators, increasing the penalties for cybercrime and targeting upstream organizations.

Speech by Acting Comptroller Hood on AI in Financial Services. On April 29, 2025, Acting Comptroller Hood gave a pre-recorded speech titled “AI in Financial Services.” In his remarks, Acting Comptroller Hood, referencing both the “tremendous potential” as a risk management and business operations tool and the risks accompanying reliance on complex technology, championed “effective, but not burdensome, regulatory oversight” and directed banks to consider the risk-based and technology-neutral principles in existing OCC and interagency guidance.

The following Gibson Dunn lawyers contributed to this issue: Jason Cabral, Ro Spaziani, and Rachel Jackson.

Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding the issues discussed in this update. Please contact the Gibson Dunn lawyer with whom you usually work or any of the member of the Financial Institutions practice group:

Jason J. Cabral, New York (212.351.6267, jcabral@gibsondunn.com)

Ro Spaziani, New York (212.351.6255, rspaziani@gibsondunn.com)

Stephanie L. Brooker, Washington, D.C. (202.887.3502, sbrooker@gibsondunn.com)

M. Kendall Day, Washington, D.C. (202.955.8220, kday@gibsondunn.com)

Jeffrey L. Steiner, Washington, D.C. (202.887.3632, jsteiner@gibsondunn.com)

Sara K. Weed, Washington, D.C. (202.955.8507, sweed@gibsondunn.com)

Ella Capone, Washington, D.C. (202.887.3511, ecapone@gibsondunn.com)

Sam Raymond, New York (212.351.2499, sraymond@gibsondunn.com)

Rachel Jackson, New York (212.351.6260, rjackson@gibsondunn.com)

Zack Silvers, Washington, D.C. (202.887.3774, zsilvers@gibsondunn.com)

Karin Thrasher, Washington, D.C. (202.887.3712, kthrasher@gibsondunn.com)

Nathan Marak, Washington, D.C. (202.777.9428, nmarak@gibsondunn.com)

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Monthly Bank Regulatory Report (April 2025)

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