Monthly Bank Regulatory Report (May 2025)

Client Alert  |  May 30, 2025

We are pleased to provide you with the May 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 GENIUS Act, establishing a statutory framework for payment stablecoins, moved closer to a full Senate vote after Democrats announced a number of amendments.
  • Acting on priorities outlined by Acting Chairman Travis Hill in his January 2025 statement, the Federal Deposit Insurance Corporation (FDIC) rescinded its 2024 Statement of Policy on Bank Merger Transactions and reinstated the prior Statement of Policy on Bank Merger Transactions. The FDIC again indicated it plans to conduct a broader reevaluation of its bank merger review process.
  • In similar fashion, the Office of the Comptroller of the Currency (OCC) adopted an interim final rule to restore the streamlined application and expedited review to its procedures for reviewing applications under the Bank Merger Act (BMA) and rescinded its 2024 policy statement on its review of applications under the BMA. The Senate and House passed a joint Congressional Review Act (CRA) resolution nullifying the OCC’s 2024 final rule. The CRA resolution has not been signed into law.
  • The OCC continued to revamp its approach to digital assets, clarifying that national banks and federal savings associations may buy and sell assets held in custody on a customer’s behalf at the direction of the customer and are permitted to outsource to third parties bank-permissible crypto-asset activities, including custody and execution services, subject to appropriate third-party risk management practices.
  • The Consumer Financial Protection Bureau (CFPB) withdrew 67 guidance documents, including interpretive rules, policy statements, advisory opinions and compliance bulletins. The withdrawals are applicable as of May 12, 2025. The CRA resolutions to repeal the CFPB overdraft rule and larger participant rule for digital payment companies were signed into law. The CFPB also rescinded its May 2022 interpretive rule regarding the scope of state enforcement under Section 1042 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act).
  • The CFPB also noted that it plans to vacate its Section 1033 open banking rule in a status report filed in the U.S. District Court for the Eastern District of Kentucky, stating “[a]fter reviewing the Rule and considering the issues that this case presents, Bureau leadership has determined that the Rule is unlawful and should be set aside.” The CFPB indicated it intends to file a motion for a summary judgment in the case by May 30, 2025.
  • The federal financial services regulatory agencies’ leadership teams continue to evolve.
    • In an unsigned opinion, the Supreme Court signaled that members of the Federal Reserve Board and other members of the Federal Open Market Committee cannot be terminated by the President without cause, by virtue of for-cause removal protections. In its opinion, the Court explained that the “Federal Reserve is a uniquely structured, quasi-private entity that follows in the distinct historical tradition of the First and Second Banks of the United States,” distinguishing it from other independent agencies.
    • The Senate Banking Committee advanced out of committee the nomination of Michelle Bowman to be the Federal Reserve Board’s Vice Chair for Supervision. Jonathan Gould’s nomination to be the next Comptroller of the Currency previously advanced out of committee. Each awaits Senate confirmation.
    • Secretary of the Treasury Scott Bessent announced President Trump’s intent to nominate Jonathan McKernan to serve as Undersecretary of Domestic Finance at the U.S. Department of the Treasury. McKernan’s nomination to serve as Director of the CFPB was withdrawn.
    • The Acting Chair of the Commodity Futures Trading Commission (CFTC) Caroline Pham announced her departure once Brian Quintenz is confirmed as Chairman. CFTC Commissioners Summer Mersinger and Christy Goldsmith Romero announced they will step down at the end of May 2025 and Commissioner Kristin Johnson announced she will step down “later this year.”
    • Vacancies remain on the boards of the FDIC and National Credit Union Administration.

DEEPER DIVES

FDIC and OCC Rescind Biden Administration Changes to Agency Review of Bank Merger Transactions. On May 8, 2025, the OCC adopted an interim final rule to restore the streamlined application and expedited review to its procedures for reviewing applications under the BMA and rescinded its 2024 policy statement on its review of applications under the BMA. (On May 7 and May 20, 2025, the Senate and House, respectively, passed a joint Congressional Review Act resolution nullifying the OCC’s 2024 final rule.) On May 20, 2025, the FDIC rescinded its 2024 Statement of Policy on Bank Merger Transactions and reinstated the prior Statement of Policy on Bank Merger Transactions, effective 30 days after publication in the Federal Register.

  • Insights. Although the changes mitigate or eliminate some of the issues created by the September 2024 changes to the agencies’ evaluations of merger transactions, more remains to be done to establish a process that maximizes predictability, efficiency and transparency for institutions of all sizes regardless of federal regulator. In that connection, the FDIC again indicated it plans to conduct a broader reevaluation of its bank merger review process.As in September 2024, the FDIC and OCC moves on changes to the agencies’ approach to evaluating transactions subject to approval under the BMA appear coordinated. Absent, though, was any coordinated action by the U.S. Department of Justice (DOJ). In September 2024, the DOJ announced the 2023 Merger Guidelines will be the “sole and authoritative statement across all industries.” The DOJ move expanded bank merger analysis beyond the traditional—and more predictable—assessment of local branch overlaps and HHI screens, into a “comprehensive and flexible framework,” considering issues such as the impact at the branch level with respect to individual lines of business, particular customer segments, or the quality/nature of customer service, and across broader geographic regions. At this time, it is unclear whether the 2023 Merger Guidelines will remain the “sole and authoritative statement across all industries,” though the 2023 Merger Guidelines do contain a HHI threshold (1,800/100) and a market share threshold (30% plus change in HHI of 100) for establishing a rebuttable presumption of anticompetitive harm.

OCC Clarifies Bank Authority to Engage in Certain Crypto-Related Activities. On May 7, 2025, the OCC published Interpretive Letter No. 1184 clarifying that national banks and federal savings associations may buy and sell assets held in custody on a customer’s behalf at the direction of the customer and are permitted to outsource to third parties bank-permissible crypto-asset activities, including custody and execution services, subject to appropriate third-party risk management practices.

  • Insights. Since the change in administration, the federal banking agencies have continued to signal increased receptivity to crypto-related activities and digital assets in the industry on behalf of clients, in all cases subject to the requirement that all activities be conducted in a safe and sound manner, consistent with all applicable laws and regulations. In practice, banks are still expected to engage with the Federal Reserve, FDIC and OCC regarding proposed crypto-related activities—as noted by the FDIC in FIL-7-2025, banks “should consider the associated risks … and should engage with their supervisory team as appropriate.”As we have previously discussed, 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. Aside from buying, selling and issuing stablecoins to facilitate payments (OCC Interpretive Letter No. 1174), limitations remain on banks’ authority to engage in crypto-related activities as principal. Further, 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.”
Agency Actions
FDIC Confirmed that FDIC-supervised institutions (i) may engage in “permissible crypto-related activities”* without receiving prior FDIC approval and (ii) “should consider the associated risks … and should engage with their supervisory team as appropriate.”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) (together, the Joint Statements).

* Although the FDIC broadly defines “permissible crypto-related activities” to include: acting as crypto-asset custodians; maintaining stablecoin reserves; issuing crypto and other digital assets; acting as market makers or exchange or redemption agents; participating in blockchain- and distributed ledger-based settlement or payment systems, including performing node functions; as well as related activities such as finder activities and lending, the footnote explaining “permissible” in FIL-7-2025 cites only to the OCC Interpretive Letters described below as examples of “permissible” activities.
Federal Reserve Confirmed that (i) state member banks may engage in permissible crypto-asset activities without providing advance notification and (ii) the Federal Reserve will monitor banks’ crypto-asset activities through the “normal supervisory process.”Withdrew from the Joint Statements.

Policy Statement on Section 9(13) of the Federal Reserve Act remains effective (describing limitations on state member banks’ authority to engage in crypto-related activities as principal).
OCC Rescinded the requirement that OCC-supervised institutions receive supervisory nonobjection before they can engage in activities described in OCC Interpretive Letters Nos. 1170, 1172, and 1174 (crypto-asset activities) and confirmed those crypto-asset activities will be examined as part of the OCC’s “ongoing supervisory process.”Published Interpretive Letter No. 1183 to confirm the following are permissible for national banks and federal savings associations:

Published Interpretive Letter No. 1184 (see above).

Withdrew from the Joint Statements.

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CFPB Continues Deregulatory Push. On May 12, 2025, the CFPB withdrew 67 guidance documents, including interpretive rules, policy statements, advisory opinions and compliance bulletins. The withdrawals are effective as of May 12, 2025. On May 15, 2025, the CFPB rescinded its May 2022 interpretive rule regarding the scope of state enforcement under Title X of the Dodd-Frank Act. The newly issued interpretive rule is effective May 15, 2025. Finally, on May 23, 2025, the CFPB notified the U.S. District Court for the Eastern District of Kentucky that it intends to vacate its 1033 open banking rule.

  • Insights. The withdrawals include 8 policy statements, 7 interpretive rules, 13 advisory opinions and 39 other pieces of guidance across a range of topics. The withdrawals are consistent with actions taken to date to narrow the CFPB’s mandate, as is the decision to vacate the 1033 open banking rule. The actions, though, have the potential to create a whipsaw effect for legal and compliance functions should future administrations re-empower the CFPB in any of these areas. Further, it is unclear whether the current administration will propose a new Section 1033 open banking rule or if the administration intends to implement one at all.

House Financial Services Committee Remains Active. On May 21, 2025, the U.S. House Financial Services Committee announced it had advanced out of committee 25 bills, many of which are designed to reshape bank regulation and supervision.

  • Insights. Although enactment of any of these bills into law is not guaranteed, certain themes emerge from a review of certain bills that are worth highlighting as continued areas of focus by the House Financial Services Committee, Senate Banking Committee, regulators and other stakeholders.
Bill (Topic) Aim Other Commentary
Bank Failure Prevention Act (timely BMA application decisions) Establishes “shot clock” for federal regulators to act on BMA applications Bowman (here); Acting FDIC Chairman Hill (here); Chairman French Hill (R-AR) (here)
Taking Account of Institutions with Low Operation Risk (TAILOR) Act (regulatory tailoring)** introduced in Senate as well Requires federal financial regulatory agencies to tailor federal regulation based on banks’ specific risk profiles and business models Bowman (here; here; here); Hill (here); Chairman French Hill (here)
Financial Institution Regulatory Tailoring Enhancement Act (regulatory tailoring) Increases from $10 billion to $50 billion the asset thresholds at which financial institutions become subject to certain requirements (e.g., Volcker, Durbin amendment, CFPB supervision) Bowman (here; here; here); Hill (here); Acting Comptroller Hood (here); Chairman French Hill (here)
Fair Audits and Inspections for Regulators’ (FAIR) Exams Act (supervisory findings appeals process) Establishes new appeals processes for financial institution supervisory determinations Hill (here); Chairman French Hill (here; here; here)
Halting Uncertain Methods and Practices in Supervision (HUMPS) Act (CAMELS ratings) Requires the regulatory agencies to update the CAMELS rating system, particularly the “Management” component Bowman (here); Hill (here); Chairman French Hill (here)
FIRM Act (debanking)** introduced in Senate as well Limits use of reputational risk in examination reports Hill (here); Chairman French (here; here); Jonathan Gould Gould (nominee) (here)

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OTHER NOTABLE ITEMS

Speech by Vice Chair Jefferson on Liquidity Facilities. On May 19, 2025, Federal Reserve Board Vice Chair Jefferson gave a speech titled “Liquidity Facilities: Purposes and Functions.” In his speech, Vice Chair Jefferson noted that the discount window has been used more than was the case before the pandemic.

FDIC Board of Directors Meeting. At the FDIC Board meeting on May 20, 2025, the FDIC Board reviewed the Deposit Insurance Fund Restoration Plan. In his remarks on the plan, Acting Chairman Hill noted that FDIC staff “project that the reserve ratio is likely to reach the statutory minimum of 1.35 percent ahead of the statutory deadline and recommend no changes to the Restoration Plan.” He also offered that the FDIC Board should consider “whether insured deposits is the right metric to measure the [Deposit Insurance Fund’s] exposure to losses,” indicating that FDIC staff, at his request, is analyzing an alternative permitted by the Federal Deposit Insurance Act to use total liabilities rather than insured deposits as the denominator of the reserve ratio.

FDIC Publishes 2025 Risk Review. On May 13, 2025, the FDIC published its 2025 Risk Review providing an overview of market and credit risks to banks in 2024. The risk review identified market risks arising from higher interest rates and an inverted yield curve during much of 2024 as an ongoing key risk to the industry. It noted that on-balance-sheet liquidity levels were “stable” in 2024, deposits increased for the first time since 2021 “as uninsured deposit growth resumed,” and wholesale funding growth slowed with the ratio of wholesale funds to total assets being “within pre-pandemic norms.” The risk review also highlighted asset quality deterioration in certain commercial real estate and consumer loan portfolio as the second key risk to banks in 2024.

Acting Comptroller Hood Discusses OCC Priorities. On May 8, 2025, Acting Comptroller Hood gave remarks at the Building Societies Annual Conference (Birmingham, England). In his remarks, Acting Comptroller Hood continued to highlight his four key areas of strategic focus for the OCC: (1) reducing regulatory burden (“ensur[ing] that regulations are effective and not excessive so that the institutions we supervise can thrive and innovate”); (2) promoting financial inclusion (“financial inclusion is the civil rights issue of our time”); (3) embracing bank-fintech partnerships (“innovation is not optional, but essential”); and (4) expanding responsible bank activities involving digital assets (“the OCC recently reaffirmed that a range of cryptocurrency activities are permissible by the institutions we supervise”).

OCC Publishes Interest Rate Risk Statistics Report. On May 14, 2025, the OCC published the spring 2025 edition of the Interest Rate Risk Statistics Report. The report presents interest rate risk data gathered during examinations of OCC-supervised midsize and community banks and federal savings associations.

OCC Issues RFI on Challenges Faced by Community Banks in Adoption and Implementation of Digital Banking Solutions. On May 5, 2025, the OCC issued a request for information (RFI) seeking input from community banks regarding the challenges and barriers faced in adopting and implementing digitalization strategies and initiatives. The RFI’s focus includes topics such as governance; diligence; third-party risk management; costs; use of AI and machine learning; and data sharing and tech interoperability. Responses to the RFI are due within 45 days of the date of publication in the Federal Register.

OFR Blog on Banks’ Unrealized Losses in Securities Portfolios. On May 15, 2025, the Office of Financial Research published a blog post, “The State of Banks’ Unrealized Securities Losses.” The post found that higher Treasury yields have kept unrealized securities losses at elevated levels, albeit lower than their highest levels reached in the third quarter of 2022. The post estimates that as of December 31, 2024, aggregate unrealized securities losses remained elevated at $481 billion, “approximately an average of 8.6% of the fair value of their aggregate securities holdings and 19.9% of the aggregate equity held at the banking subsidiaries.”

Joint Study Explores Feasibility of Central Bank Operations Using Tokenization and Smart Contracts. The Federal Reserve Bank of New York and the Bank for International Settlements published a joint research study that found that central banks could customize and deploy policy implementation tools using programmable smart contracts in a potential future state where commercial banks and other private sector financial institutions have widely adopted tokenization for wholesale payments and securities settlement.

Speech by Governor Cook on Financial Stability. On May 23, 2025, Federal Reserve Board Governor Lisa Cook gave a speech titled “A View on Financial Stability.” In her speech, Governor Cook focused on overall financial stability and ongoing uncertainty and risks. She highlighted ongoing risk and uncertainty in the system, as well as the importance of better understanding the interaction of banks and nonbanks and how that may impact overall financial stability and market shock absorption.

Speech on Recent Developments in Treasury Market Liquidity and Funding Conditions. In remarks on May 9, 2025, Roberto Perli, manager of the Federal Reserve’s System Open Market Account, discussed recent developments in U.S. Treasury market liquidity. On May 13, 2025, the Federal Reserve Bank of New York’s Teller Window highlighted Perli’s speech.

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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