Monthly Bank Regulatory Report (June 2025)

Client Alert | June 30, 2025

We are pleased to provide you with the June 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 Board of Governors of the Federal Reserve System (Federal Reserve), Office of the Comptroller of the Currency (OCC) and Federal Deposit Insurance Corporation (FDIC) issued a proposal to modify the enhanced supplementary leverage ratio applicable to U.S. GSIBs and their bank subsidiaries. The proposal aims to reduce the likelihood that the supplementary leverage ratio would be a “regularly binding or near-binding constraint.”
During his testimony before the Senate Banking Committee, Chair Powell again indicated the agencies will take action on Basel III “in the relatively near future.” The Federal Reserve also published its agenda for its July 22, 2025 Integrated Review of the Capital Framework for Large Banks Conference.
Michelle Bowman was sworn in as Vice Chair for Supervision of the Federal Reserve Board. In her first remarks as Vice Chair for Supervision, Bowman previewed an agenda consistent with her past remarks and speeches – pragmatism in supervisory approach, the role of guidance in supervision, supervision focused on material financial risks, tailoring, supervisory ratings, capital, and de novo charter and bank M&A application processing timelines.
In those same remarks, Vice Chair for Supervision Bowman also identified the ongoing challenges presented to banks, particularly small banks, of check fraud. Days later, the Federal Reserve, OCC and FDIC released a request for information on potential actions to address payments and check fraud.
Annual bank stress test results were released with all 22 banks tested remaining well capitalized during the stress scenario. The release acknowledges the smaller 1.8 percentage point decline in the CET1 ratio than in past years reflects the “unintended volatility” in the models used for the stress tests, which the Federal Reserve will disclose for public comment later this year. Vice Chair for Supervision Bowman urged that finalizing the April 2025 proposal to average two consecutive years of stress test results would “address the excess volatility in the stress tests results and corresponding capital requirements.”
The Federal Reserve joined the OCC and FDIC in removing reputational risk from bank supervision.
The OCC issued guidance describing its plan to address criminally liable regulatory offenses consistent with Executive Order (EO) 14294 titled, “Fighting Overcriminalization in Federal Regulations.”
The GENIUS Act passed the Senate with a 68-30 vote.

DEEPER DIVES

Federal Banking Agencies Proposed Changes to Enhanced Supplementary Leverage Ratio. The Federal Reserve, OCC and FDIC issued a proposal to modify the enhanced supplementary leverage ratio (eSLR) applicable to U.S. GSIBs and their bank subsidiaries. The proposal aims to reduce the likelihood that the supplementary leverage ratio would be a “regularly binding or near-binding constraint,” with a principal aim of “reducing potential disincentives for GSIBs and their depository institution subsidiaries to participate in low-risk, low-return businesses, including U.S. Treasury market intermediation.” To do so, the proposal would modify the eSLR standard applicable to GSIBs by recalibrating the fixed 2% eSLR buffer standard for GSIBs to equal 50% of a GSIB’s method 1 surcharge as determined under the Federal Reserve’s risk-based GSIB surcharge framework. The proposal would also align the calibration of the eSLR standard applicable to depository institution subsidiaries of GSIBs with that applicable to their GSIB parent bank holding companies by removing the eSLR threshold for a depository institution subsidiary of a GSIB to be considered “well capitalized” under the prompt corrective action framework and instead implementing the eSLR as a buffer standard equal to 50% of the parent GSIB’s method 1 surcharge calculation. In addition, the proposal invites comment on a potential additional modification that would exclude from the denominator of the supplementary leverage ratio held-for-trading Treasuries of certain broker-dealer subsidiaries of GSIBs.

Insights. The proposal is consistent with the stated intention of the federal banking agencies to be pragmatic in their approach to tailoring regulatory requirements and in considering risk within the financial system. We note that the dissenting statements by Governors Barr and Kugler acknowledge the need for resilience of the U.S. Treasury market, but note that more modest changes would be preferred, particularly, as Governor Barr noted, if considered in conjunction with other Basel III implementation.

Vice Chair for Supervision Michelle Bowman Previews Agenda as Vice Chair for Supervision. On June 9, 2024, Federal Reserve Board Governor Michelle Bowman was sworn in as the third Vice Chair for Supervision, for a four-year term ending June 9, 2029 (her term as a member of the Federal Reserve Board ends on January 31, 2034).

Insights. In her first remarks as Vice Chair for Supervision, Bowman was consistent in setting out her principles for a “pragmatic” approach to bank supervision and regulation, arranged by the following topics, which we expect to see implemented in a variety of manners by the federal banking agencies in their regulation and supervision of regulated institutions of all sizes:

Topic	Summary
Financial Risk	As she has discussed in the past, Vice Chair for Supervision Bowman is a proponent of supervision “focused on material financial risks” rather than supervision that tends to “overemphasize or become distracted by relatively less important procedural and documentation shortcomings.” As she has consistently noted, “our goal should be to prioritize the identification of material financial risks and encourage prompt action to mitigate risks that threaten safety and soundness.”
Improving Prioritization	In that same vein, Bowman also stresses the need for “improving prioritization” of activities in the supervisory process, stating: “A random sample of examination reports demonstrates that supervisory focus has shifted away from core financial risks (credit risk, interest rate risk, and liquidity risk, for example), to process-related concerns. While process is important for effective management, there is a risk that overemphasis on process and supervisory box-checking can be a distraction from the core purpose of supervision, which is to probe financial condition and financial risk.”
Tailoring	Bowman aptly describes herself as a “long-time proponent of tailoring banking regulations.” Her approach will include extending the application of tailoring to the Federal Reserve’s supervisory approach to financial institutions both among bank categories and within a particular category. She, like others, has voiced concerns with the current $10 billion threshold defining the upper bounds of a community bank.
Ratings	Citing to the Federal Reserve’s most recent Supervision and Regulation Report, Bowman addresses what many, including Bowman, have perceived as “gradual changes in supervisory approaches that have eroded the link between ratings and financial condition” and resulted in “a disparity between well-managed status and financial condition.” In that connection, she notes that the Federal Reserve will begin by proposing changes to the Large Financial Institution ratings framework. She also suggests the Federal Reserve will consider the ratings framework for smaller institutions, including the CAMELS framework.
Banking Applications	Bowman has consistently discussed the need for change to the Federal Reserve’s review of applications and echoes that again in her remarks: “recent experience with banking applications suggests that revisions would be helpful in this space.” She regularly promotes a consistent application review process that aims for both “(1) transparency as to the information required in the application itself, and the standards of approval being applied, and (2) clear timelines for action.” This includes considering whether many of the additional requests for information can be addressed through changes to the agencies’ application forms or relying more on information that is available from examinations and ongoing supervision.

Guidance on Referrals for Potential Criminal Enforcement. On June 23, 2025, the OCC issued guidance describing its plan to address criminally liable regulatory offenses. The OCC identified four considerations relevant when deciding whether to refer alleged violations of criminal regulatory offenses to the Department of Justice: (1) the harm or risk of harm, pecuniary or otherwise, caused by the alleged offense; (2) the potential gain to the putative defendant that could result from the offense; (3) whether the putative defendant held specialized knowledge, expertise, or was licensed in an industry related to the rule or regulation at issue; and (4) evidence, if any is available, of the putative defendant’s general awareness of the unlawfulness of his conduct as well as his knowledge or lack thereof of the regulation at issue.

Insights. The OCC guidance flows from and is consistent with policies identified by the administration generally, and specifically in EO 14294 titled, “Fighting Overcriminalization in Federal Regulations,” which broadly pronounced that “criminal enforcement of criminal regulatory offenses is disfavored.” The OCC’s focus on harm caused by the offense and potential gain to the alleged offender could foreshadow fewer referrals for technical violations without victims or beneficiaries, and the remaining two factors focus on knowledge, which could further shape future referrals. However, as directed by the EO, the OCC stated that it will publish a list of criminal regulatory offenses, and the range of potential criminal penalties and applicable state of mind required for each offense by May 2026. This future guidance will further illuminate criminal enforcement priorities, particularly as many of the administration’s general enforcement priorities focus on financial institutions as gatekeepers to the U.S. financial system.

OTHER NOTABLE ITEMS

Federal Banking Agencies Issue Request for Information on Payments and Check Fraud. On June 16, 2025, the Federal Reserve, OCC and FDIC released a request for information (RFI) on potential actions to address payments and check fraud. The RFI requests comment on five specific areas that could help mitigate payments fraud: (1) external collaboration; (2) consumer, business and industry education; (3) regulation and supervision; (4) payments fraud data collection and information sharing; and (5) Federal Reserve Banks’ operator tools and services.

Federal Banking Agencies and NCUA Issue Order Granting Exemption to CIP Rule. The federal banking agencies and National Credit Union Administration, with the concurrence of FinCEN, issued an order granting an exemption from the Customer Identification Program (CIP) rule requirement that a bank or credit union obtain taxpayer identification number (TIN) information from its customer before opening an account. The exemption permits a bank or credit union to use an alternative collection method to obtain TIN information from a third-party rather than from the customer.

Federal Reserve Moves on Reputational Risk. Following Chair Powell’s commitment to the Senate Banking Committee during his February testimony, on June 23, 2025, the Federal Reserve announced that reputational risk will no longer be a component of examination programs in its supervision of banks. With the announcement, the Federal Reserve joins the OCC and FDIC in removing reputational risk from bank supervision.

Speech by Vice Chair for Supervision Bowman on Economic Shifts Producing Unintended Consequences in Supervision and Regulation. On June 23, 2025, Vice Chair for Supervision Bowman gave a speech titled “Unintended Policy Shifts and Unexpected Consequences.” In her speech, Bowman discussed how leverage ratio requirements applicable to banks have had unintended consequences in Treasury market intermediation activities, a principal aim of the agencies’ eSLR proposal.

Federal Reserve Publishes Agenda for Conference on Large Bank Capital Requirements. On June 26, 2025, the Federal Reserve published its agenda for its July 22, 2025 Integrated Review of the Capital Framework for Large Banks Conference. The conference aims to examine the interaction between the key pillars of the regulatory capital framework – Basel III Endgame, stress testing, the capital surcharge for the largest banks and leverage requirements.

OCC Releases Letter on Preemption. On June 9, 2025, Acting Comptroller Hood released a letter in response to correspondence from the Conference of State Bank Supervisors requesting the OCC rescind its preemption regulations. In the letter, Acting Comptroller Hood reaffirmed the OCC would “not rescind its regulations and will continue to vigorously support and defend federal preemption” on the grounds those regulations “are consistent with federal law, Supreme Court precedent, and [Executive Orders 14219—Ensuring Lawful Governance and Implementing the President’s “Department of Government Efficiency” Deregulatory Initiative and 14267—Reducing Anti-Competitive Regulatory Barriers].”

Acting Comptroller Hood Discusses OCC Regulatory Agenda. On June 3, 2025, Acting Comptroller Hood discussed the OCC’s regulatory agenda before the U.S. Chamber of Commerce Capital Markets Forum. Acting Comptroller Hood’s remarks were consistent with prior speeches and highlighted four key areas of strategic focus for the OCC: (1) accelerating bank-fintech partnerships; (2) expanding responsible engagement with digital assets; (3) advancing financial inclusion; and (4) modernizing regulation. In his remarks, Acting Comptroller Hood also highlighted that beyond digital assets, the OCC also is “monitoring emerging technologies like generative AI, agentic AI, and quantum computing.”

OCC Releases Semiannual Risk Perspective. On June 30, 2025, the OCC released its Semiannual Risk Perspective for Spring 2025. Closely following the agencies’ RFI on potential actions to address payments and check fraud, the OCC’s report includes a similar discussion to past reports on consumer compliance risks associated with increased levels and sophistication of fraud. The report highlights the OCC’s concerns that instances of fraud, suspected fraud or other suspicious activities be “promptly” investigated, resolved and, as appropriate, funds credited in accordance with the Expedited Funds Availability Act (Regulation CC), Electronic Fund Transfer Act (Regulation E) and Federal Trade Commission Act. The report also highlights that although increases in fraud cases and their sophistication “may necessitate reasonable delays as allowed by law or regulation,” such delays “may also exacerbate compliance risk when banks take prolonged timeframes to complete investigations or implement broad account access limitations, preventing customers, including those who are not victims of fraud, from accessing their funds.”

NYDFS Issues Cybersecurity Guidance Regarding Impact of Ongoing Global Conflicts. On June 23, 2025, the New York State Department of Financial Services (NYDFS) issued guidance to all NYDFS-regulated entities highlighting steps “regulated entities should take to prepare for an increased threat of cybersecurity attacks, in light of ongoing global conflict.” The three areas of focus of the bulletin were cybersecurity, sanctions and virtual currency.

Michael E. Horowitz Appointed Inspector General for Federal Reserve Board and CFPB. On June 6, 2025, the Federal Reserve announced Michael E. Horowitz’s appointment to lead the Federal Reserve Board’s Office of Inspector General effective June 30, 2025. Mr. Horowitz will serve in that same role for the CFPB.

FDIC Updates List of PPE. On June 4, 2025, the FDIC updated the list of companies that have submitted notices for a Primary Purpose Exception under the 25% or Enabling Transactions test.

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)

Attorney Advertising: These materials were prepared for general informational purposes only based on information available at the time of publication and are not intended as, do not constitute, and should not be relied upon as, legal advice or a legal opinion on any specific facts or circumstances. Gibson Dunn (and its affiliates, attorneys, and employees) shall not have any liability in connection with any use of these materials. The sharing of these materials does not establish an attorney-client relationship with the recipient and should not be relied upon as an alternative for advice from qualified counsel. Please note that facts and circumstances may vary, and prior results do not guarantee a similar outcome.

Monthly Bank Regulatory Report (June 2025)

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