Monthly Bank Regulatory Report (August 2025)

Client Alert  |  August 29, 2025

We are pleased to provide you with the August 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

  • President Trump signed an Executive Order directing the federal banking agencies, Consumer Financial Protection Bureau (CFPB), National Credit Union Administration (NCUA) and Small Business Administration (SBA) to investigate whether financial institutions have engaged in “politicized or unlawful debanking” practices. See our Client Alert here.
  • On August 25, 2025, President Trump fired Federal Reserve Board Governor Lisa Cook from the Board of Governors. Governor Cook filed a complaint on August 28, 2025 in federal court in Washington, D.C., challenging the president’s attempt to remove her from office, paving the way for a legal battle over the president’s “for cause” removal authority.
  • Federal Reserve Board Governor Adriana Kugler submitted her resignation effective August 8, 2025. Governor Kugler’s term was set to expire January 31, 2026. Stephen Miran, Chairman of the Council of Economic Advisers, was nominated to replace Governor Kugler for the remainder of her term.
  • Consistent with past initiatives and agency actions with respect to crypto-related activities and digital assets, the Board of Governors of the Federal System (Federal Reserve) announced it will “sunset” its novel activities supervision program and return to monitoring those activities through the normal supervisory process.
  • As stated last month in a filing to the U.S. District Court for the Eastern District of Kentucky in the section 1033 open banking rule litigation, the CFPB issued an advance notice of proposed rulemaking (ANPR) on its section 1033 open banking rule. The CFPB also issued:
    • four ANPRs seeking comment on raising “larger participant” thresholds in auto finance, remittances, credit reporting and debt collection markets, potentially reducing significantly the number of nonbank entities subject to CFPB supervision; and
    • a proposed rule to adopt a standard definition of “risks to consumers with regard to the offering or provision of consumer financial products or services” that will bind the CFPB in proceedings to designate “nonbank covered persons” for CFPB supervision.

DEEPER DIVES

President Trump Issues Executive Order Addressing “Politicized or Unlawful” Debanking. On August 7, 2025, President Trump signed an Executive Order directing the federal banking agencies, CFPB, NCUA and SBA to investigate whether financial institutions have engaged in “politicized or unlawful debanking” practices in violation of federal law. The Executive Order alleges that bank regulators have used their “supervisory scrutiny and influence” over banks to “direct” or “encourage” politicized or unlawful debanking activities, including debanking on the basis of political affiliation, religious belief, or engagement in lawful business activities.

  • Insights. Our Client Alert details the terms of the Executive Order and highlights potential issues associated with the agency-mandated lookback and potential Congressional investigations stemming from the Executive Order. Some principal takeaways are highlighted below:
Opportunities for (Re)Engagement The Executive Order creates opportunities for the industry to advocate with (i) policymakers in the implementation of proposed legislative solutions and (ii) regulators as the agencies shift away from subjective reputation risk assessments to the implementation of clearer, more objective guidance in the supervisory process.

Although no federal banking agency or the NCUA has signaled a formal proposed rulemaking is forthcoming, any proposed rulemaking could be informed by the OCC’s 2021 fair access rule. Even absent a proposed rulemaking, the OCC’s fair access rule may shed light on how the agencies will consider the issues of reputation risk and fair access in this administration.
Reputation Risk Assessments The Executive Order directs the “federal banking regulators” (as defined in the Executive Order) to consider rescinding or amending existing regulations “to ensure that any regulated firm’s or individual’s reputation is considered for regulatory, supervisory, banking, or enforcement purposes solely to the extent necessary to reach a reasonable and apolitical risk-based assessment.” This further establishes that reputation risk can remain embedded in “individualized, objective, risk-based analyses.”
“Individualized, objective, and risk-based analyses” This language appears twice in the Executive Order and reinforces that institutions will continue to be expected to adhere to robust initial and ongoing due diligence inquiries of customers to address core banking risk assessments, including credit risk, strategic risk, market risk, operational risk, and legal and compliance risk, among other core banking risks.

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Legal Questions Surrounding the Termination of Federal Reserve Board Governor Cook. On August 25, 2025, President Trump fired Federal Reserve Board Governor Lisa Cook from the Board of Governors. Governor Cook filed a complaint on August 28, 2025 in federal court in Washington, D.C., challenging the president’s attempt to remove her from office, paving the way for a legal battle over the president’s “for cause” removal authority. A court hearing on Governor Cook’s request for a request for a temporary restraining order that President Trump be temporarily barred from firing her while her lawsuit is pending took place on August 29, 2025.

  • Insights. The Federal Reserve, also a named defendant in Governor Cook’s lawsuit, submitted a response to Governor Cook’s motion for a temporary restraining order. The Federal Reserve noted that it is “being sued to ensure that Governor Cook can obtain complete relief if she is successful on her claims.” The Federal Reserve further stated “it does not intend to offer arguments concerning Governor Cook’s motion … [it] merely expresses (1) its interest in a prompt ruling by [the] Court to remove the existing cloud of uncertainty; and (2) its intent to follow any order this Court issues.” At the time of this publication, no ruling has been made.

CFPB Issues Section 1033 Open Banking ANPR. On August 22, 2025, the CFPB issued an advance notice of proposed rulemaking (ANPR) on its section 1033 open banking rule. Comments on the open banking ANPR are due by October 21, 2025. On August 8, 2025, the CFPB also issued four ANPRs seeking comment on raising “larger participant” thresholds in auto finance, remittances, credit reporting and debt collection markets. Comments on the four ANPRs are due by September 22, 2025. Finally, on August 26, 2025, the CFPB issued a proposed rule to adopt a standard definition of “risks to consumers with regard to the offering or provision of consumer financial products or services” that will bind the CFPB in proceedings to designate “nonbank covered persons” for CFPB supervision. The proposed rule would explain that “conduct that poses risks to consumers with regard to the offering or provision of consumer financial products or services” consists of conduct that: (a) presents a high likelihood of significant harm to consumers; and (b) is directly connected to the offering or provision of a consumer financial product or service (as defined in Section 1002 of the Consumer Financial Protection Act). Comments on the proposed rule are due by September 25, 2025.

  • Insights. The open banking ANPR follows an interesting procedural history before the Eastern District of Kentucky in which the CFPB first stated to the court that the 1033 open banking rule was unlawful and should be set aside, but then pivoted and sought a stay of the court proceedings challenging the rule after deciding to initiate a new rulemaking to reconsider the rule. The ANPR focuses on four core issues: (i) who may act as a “representative” for the consumer; (ii) fee structures (i.e., whether data providers should be allowed to charge fees to offset the costs of responding to consumer data requests); (iii) data security; and (iv) data privacy concerns around unauthorized licensing or sale of consumer financial data. Each of the four ANPRs and the proposed rule appear aimed at reducing significantly the number of nonbank entities subject to CFPB supervision consistent with the CFPB’s intentional shift of supervisory focus back to depository institutions as opposed to non-depository institutions.

OTHER NOTABLE ITEMS

Federal Reserve to Sunset Novel Activities Supervision Program. On August 15, 2025, the Federal Reserve announced it will rescind the 2023 supervisory letter creating its novel activities supervision program and return to monitoring banks’ novel activities through the normal supervisory process. The supervision program was designed to focus on the following activities: (i) complex, technology-driven partnerships with non-banks to provide banking services; (ii) crypto-asset related activities; (iii) projects that use distributed ledger technology; and (iv) concentrated provision of banking services to crypto-asset-related entities and fintechs.

Federal Reserve Announces Final Individual Capital Requirements for Large Banks. On August 29, 2025, the Federal Reserve announced final individual capital requirements for large banks, effective October 1, 2025, follow its stress test earlier this year.

FDIC Issues CIP Guidance. On August 5, 2025, the FDIC issued a supervisory letter (FIL-39-2025) updating its supervisory approach regarding whether an FDIC-supervised institution can use pre-populated customer information for the purpose of opening an account to satisfy Customer Identification Program (CIP) requirements. According to the FIL, the CIP rule’s requirement to collect identifying information “from the customer” does not preclude the use of pre-filled information. According to the FIL, a financial institution could use information from current or prior accounts or relationships involving the bank or its agents, or other sources, such as parent organizations, affiliates, vendors, and other third parties to pre-fill information that is reviewed and submitted by the customer. As an examination matter, the FIL clarifies that FDIC examiners will consider the pre-filled information as “from the customer” provided: (1) the customer has opportunity and the ability to review, correct, update, and confirm the accuracy of the information; and (2) the institution’s processes for opening an account that involves pre-populated information allow the institution to form a “reasonable belief as to the identity of its customer” and such processes are based on the institution’s assessment of relevant risks, including fraud risk.

FDIC Issues Proposal to Amend Official Signs and Advertising Requirements. On August 19, 2025, the FDIC issued a proposed rule to amend its signage requirements for insured depository institutions’ digital deposit-taking channels, ATMs and similar devices. The proposed changes are intended to address implementation issues and sources of potential confusion that have arisen following the adoption of current signage requirements for those channels. Comments on the proposal are due by October 20, 2025.

Federal Reserve and FDIC Release Public Portions of Resolution Plans for Largest Banking Organizations. On August 5, 2025, the Federal Reserve and FDIC released the public sections of resolution plans for the eight largest and most complex domestic banking organizations and 56 foreign banking organizations. In addition, the FDIC released the public sections of the separate resolution plans of 12 large insured depository institutions.

Treasury Issues Request for Comment on Innovative Methods To Detect Illicit Activity Involving Digital Assets. As required under Section 9(a) of the GENIUS Act and in furtherance of the January 23, 2025 Executive Order 14178 on “Strengthening American Leadership in Digital Financial Technology,” the Department of the Treasury issued a request for comment inviting the public to provide input on the use of innovative or novel methods, techniques, or strategies to detect and mitigate illicit finance risks involving digital assets. Comments in response to the request are due by October 17, 2025.

FDIC Acting Chairman Issues Statement in Support of Debanking Executive Order. On August 8, 2025, FDIC Acting Chairman Travis Hill issued a statement in support of the Executive Order prohibiting “politicized or unlawful debanking” practices. In his statement, Acting Chairman Hill noted again that the FDIC plans to issue a rulemaking that would “prohibit examiners from criticizing institutions on the basis of reputational risk or directing or encouraging institutions to close accounts on the basis of political, social, religious, or other views.” He also added that the agency would conduct the lookback as directed by the Executive Order.

Comptroller of the Currency Issues Statement in Support of Debanking Executive Order. On August 7, 2025, Comptroller of the Currency Jonathan Gould issued a statement in support of the Executive Order prohibiting “politicized or unlawful debanking” practices. In his statement, Comptroller Gould indicated that the OCC will soon propose a rule removing reputation risk references from its regulations and conduct the agency lookback as directed by the Executive Order.

SBA Sends Letter to Lenders Following Debanking Executive Order. On August 26, 2025, Small Business Administration (SBA) sent a letter to its network lenders instructing them to end “politicized or unlawful banking practices.” In the letter, the SBA orders lenders to take the actions set forth in the Executive Order by December 5, 2025.

Speech by Vice Chair for Supervision Bowman on Innovation. On August 19, 2025, Vice Chair for Supervision Michelle Bowman gave a speech titled “Embracing Innovation” at the Wyoming Blockchain Symposium. In her speech, Vice Chair for Supervision Bowman covered four central topics: (i) innovation, namely the benefits or potential benefits of tokenization; (ii) reputational risk; (iii) engagement with regulators; and (iv) creating a tailored and proportional regulatory framework that fosters innovation in the banking industry.

Speech by Governor Waller on Payments. On August 20, 2025, Federal Reserve Board Governor Christopher Waller gave a speech titled “Technological Advancement in Payments.” In his speech, Governor Waller highlighted what he called a “technology-driven revolution” in payments systems, highlighting stablecoins, AI and real-time payments as some examples demonstrating that “the evolution of the payment system has long been a story of technological advancement.”

Speech by Vice Chair for Supervision Bowman on Community Banking. On August 10, 2025, Vice Chair for Supervision Michelle Bowman gave a speech titled “Thoughts on the Economy and Community Bank Capital.” In her speech, Vice Chair for Supervision Bowman highlighted many of the Federal Reserve’s initiatives already underway, including reviews or currently outstanding proposals on capital, liquidity and the supervisory process. Specifically, she noted her view that “it is time to consider modifications to the [community bank leverage ratio] CBLR framework that make it a more attractive framework and will encourage more banks to adopt it,” including by lowering the CBLR from 9% to 8%. On fraud, Bowman highlighted the June interagency request for information on addressing payments and check fraud and noted the need to revise “outdated regulations like Regulation CC” in furtherance of combatting fraud.

OCC Issues Annual Update to the Bank Accounting Advisory Series. On August 15, 2025, the OCC released its annual update to the Bank Accounting Advisory Series (BAAS). The BAAS contains staff responses to frequently asked questions from the banking industry and bank examiners on a variety of accounting topics and promotes consistent application of accounting standards and regulatory reporting among national banks and federal savings associations.

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 (+1 212.351.6267, jcabral@gibsondunn.com)

Ro Spaziani, New York (+1 212.351.6255, rspaziani@gibsondunn.com)

Stephanie L. Brooker, Washington, D.C. (+1 202.887.3502, sbrooker@gibsondunn.com)

M. Kendall Day, Washington, D.C. (+1 202.955.8220, kday@gibsondunn.com)

Jeffrey L. Steiner, Washington, D.C. (+1 202.887.3632, jsteiner@gibsondunn.com)

Sara K. Weed, Washington, D.C. (+1 202.955.8507, sweed@gibsondunn.com)

Ella Capone, Washington, D.C. (+1 202.887.3511, ecapone@gibsondunn.com)

Sam Raymond, New York (+1 212.351.2499, sraymond@gibsondunn.com)

Rachel Jackson, New York (+1 212.351.6260, rjackson@gibsondunn.com)

Hayden McGovern, Dallas (+1 214.698.3142, hmcgovern@gibsondunn.com)

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