Financial Stability Oversight Council Outlines Expanded Strategic Priorities in 2025 Annual Report

On December 11, the Financial Stability Oversight Council (FSOC) unanimously approved its 2025 Annual Report, which describes the FSOC’s restructured risk assessment framework and policy recommendations to emphasize sustainable economic growth, economic security, and financial stability. In remarks delivered at the meeting, Secretary of the Treasury Scott Bessent stated that the Council will integrate considerations of cumulative regulatory burden, economic growth resilience, and technological and household resilience into its assessments of financial stability risks, asserting that “sustainable long-term economic growth and economic security are both essential to financial stability.” The 2025 Annual Report highlights actionable recommendations across key areas, including Treasury market resilience, cybersecurity and evolving threat landscapes, enhancements to supervisory and regulatory frameworks for depository institutions, and the role of artificial intelligence in promoting resilience, and reflects an organizational shift toward prioritizing these interrelated themes in its monitoring and oversight work. A Council readout from that meeting describes priority workstreams including the Artificial Intelligence Working Group, Household Resilience and Market Resilience groups, and potential revisions to interpretive guidance on nonbank financial company determinations and analytic frameworks for risk identification.

On December 17, the Office of the Comptroller of the Currency (OCC) issued proposed guidance to establish a simplified strategic plan process under the Community Reinvestment Act (CRA) for community banks, aiming to reduce regulatory burden and tailor CRA examinations to the capacity and business strategy of individual institutions. The proposal clarifies expectations for measurable goals and other strategic plan components and simplifies the method for drafting and submitting a strategic plan to the OCC for approval. Comments must be received within 60 days from publication in the Federal Register. Comments must be received by February 20, 2026.

On December 16, the Federal Deposit Insurance Corporation (FDIC) Board of Directors approved a final rule designed to increase procedural clarity and predictability for branch and office applications under Section 18(d) of the Federal Deposit Insurance Act, streamlining how insured state nonmember banks and insured branches of foreign banks establish new branches or relocate main offices or branches. Similar to the July 2025 proposed rule, the final rule accelerates and simplifies the application process by eliminating certain filing requirements, expanding eligibility for expedited processing (with qualifying filings eligible for automatic approval in as few as three business days), removing the FDIC’s discretion to remove filings from expedited processing, eliminating public notice and comment requirements, extending the expiration period for approved filings from 18 to 24 months, and exempting de minimis facility changes from filing requirements, while streamlining required application content for filings. The final rule will take effect 60 days after publication in the Federal Register.

On December 5, the OCC and FDIC (together, the Agencies) jointly withdrew their 2013 Interagency Guidance on Leveraged Lending and 2014 FAQs, which were originally issued in the aftermath of the 2008-2009 financial crisis, when regulators sought to curb rapid growth in highly leveraged corporate credit and perceived weaknesses in underwriting discipline. Following a 2017 Government Accountability Office (GAO) determination that the guidance constituted a “rule” under the Congressional Review Act, regulators clarified that the guidance was supervisory rather than binding. Subsequent industry feedback, litigation developments, and market evolution – particularly the shift of leveraged credit activity toward private credit and non-bank financing – has culminated in the FDIC and OCC formally ending the decade-old framework governing bank participation in leveraged-loan origination, underwriting, and exposure management. The 2013 guidance did not prescribe a specific definition of leveraged lending but suggested that loans where the proceeds would be used to fund buyouts, acquisitions or capital distributions, or transactions where the borrowers’ total debt divided by EBITDA (earnings before interest taxes, depreciation, and amortization) exceeded 4.0X EBITDA or senior debt divided by EBITDA exceeded 3.0X EBITDA, among other circumstances, could be considered leveraged.

Pursuant to the withdrawal, banks supervised by the OCC or FDIC engaging in leveraged lending will no longer be examined against the prescriptive parameters of the prior guidance. Instead, examiners will evaluate leveraged-lending activities using the Agencies’ longstanding safety-and-soundness expectations applicable to commercial lending generally, with the scope of supervision tailored to the size, complexity, and risk profile of each institution.

Large and regional banks active in leveraged finance should consider revisiting internal credit policies, underwriting parameters, syndication practices, and sponsor-finance frameworks to ensure they remain defensible without reference to the rescinded guidance. Banking organizations that previously avoided leveraged lending due to regulatory signaling may reassess participation, subject to internal governance, concentration limits, and capital considerations, while smaller and community banks should confirm that commercial-credit policies clearly address higher-risk lending, given that examiners will now evaluate such exposure under standard commercial-credit safety-and-soundness expectations rather than a dedicated leveraged-lending rubric.

Notably, while the 2013 Interagency Guidance and subsequent FAQs were issued jointly by the OCC, the FDIC and the Federal Reserve Board, the Federal Reserve Board has not announced that it is rescinding the guidance. In addition, institutions should be aware that, in certain circumstances, a concentration of higher-risk assets, including higher-risk C&I loans, can result in a higher deposit insurance assessment. The FDIC’s deposit insurance assessment rules describe a loan as leveraged for purposes of determining whether it is a higher risk loan if the borrower’s leverage ratios exceed thresholds similar to those described in the 2013 guidance.

On December 16, the FDIC Board of Directors approved a proposed rule to establish procedures under the Guiding and Establishing National Innovation for US Stablecoins Act (GENIUS Act) for subsidiaries of insured state non-member banks and state savings associations to seek approval to become permitted payment stablecoin issuers. Comments on the proposed rule are due by February 17, 2026. The FDIC is the first agency to issue a proposal related to application procedures under the GENIUS Act. The proposed rule is largely procedural in nature and would implement the requirements of Section 5 of the GENIUS Act related to applications of subsidiaries of insured depository institutions with respect to FDIC-supervised institutions. If adopted, the proposed rule would describe the information to be included in an application submitted to the FDIC for a subsidiary of an FDIC-supervised institution to become a permitted payment stablecoin issuer and would address timing and other matters related to processing of such applications. Importantly, Section 5(f) of the GENIUS Act authorizes the FDIC to waive certain requirements of the GENIUS Act (for a period of time up to 12-months from the effective date of the GENIUS Act) that would otherwise apply to a subsidiary of an insured depository institution that has an application pending to become a permitted payment stablecoin issuer on the effective date of the GENIUS Act. The FDIC did not include in the proposal provisions to address procedures for requesting a waiver under this safe harbor provision due to the temporary nature of the provision and the case-by-case analysis required for any waiver. The proposal does not address other matters for which additional rulemaking is required under the GENIUS Act, such as regulations required under Section 4 of the GENIUS Act relating to certain prudential requirements for stablecoin issuers.

On December 9, the OCC issued Interpretive Letter No. 1188, confirming that national banks may engage in “riskless principal” transactions involving crypto-assets on behalf of customers. In a riskless principal transaction, the bank acts as an intermediary, purchasing a crypto-asset from one counterparty for immediate resale to another, with offsetting transactions executed contemporaneously and minimal market or credit risk retained. The intermediary’s purchase of the asset from the initial counterparty is conditioned on an offsetting order from the second counterparty to purchase the same asset from the intermediary.

The OCC concluded that national banks may conduct these activities whether the crypto-assets involved are securities or non-securities. For crypto-assets that are securities, such transactions are permissible under existing securities brokerage authority. For non-security crypto-assets, the OCC found the activity to be the functional equivalent of traditional bank brokerage services and a logical extension of previously permitted crypto-asset custody and trade-execution activities and provides benefits to banks' customers and businesses. The OCC emphasized that banks must conduct these activities in a safe and sound manner and remain subject to ongoing supervisory review.

On December 12, the OCC announced conditional approvals of five national trust bank charter applications, advancing both de novo and conversion applications for institutions that will operate under national trust charters subject to conditions and pre-opening requirements before final OCC authorization. The approved applications include two de novo national trust banks (First National Digital Currency Bank, Ripple National Trust Bank) and three conversions from state trust companies to national trust banks (BitGo Bank & Trust, Fidelity Digital Assets, Paxos Trust Company). This action reflects agency interest in opening up entry into the federal banking system through trust charters, particularly for firms with digital asset or fiduciary-centric business plans.

On December 17, the Board of Governors of the Federal Reserve System (Federal Reserve) rescinded its 2023 policy statement interpreting Section 9(13) of the Federal Reserve Act and replaced it with a new policy statement clarifying how the Board will evaluate innovative or nontraditional activities by state member banks and applicants, including principal activities that are not otherwise permissible for insured state banks. The new policy statement explains that the 2023 policy statement’s focus on “novel and unprecedented” activities – particularly in the crypto-asset context – was no longer appropriate, and reaffirmed a principles-based approach centered on safety and soundness, financial stability, and risk-based parity. This action signals a more flexible supervisory posture that may ease the path for state member banks seeking approval of innovative activities, subject to supervisory review.

On December 18, the OCC and FDIC (together, the Agencies) issued a bulletin rescinding OCC Bulletin 2024-37, pertaining to the treatment of extensions of credit to certain investment funds and their portfolio investments, and clarifying supervisory expectations under Regulation O and the FDIC’s Part 363 reporting rules (12 CFR 363) for certain investment funds and fund complex-controlled portfolio companies. The bulletin explains that the Agencies will continue to exercise discretion not to take supervisory or enforcement action against banks that extend credit to fund complex-controlled portfolio companies that would otherwise violate Regulation O, provided specified conditions are met, and likewise will not take action for related failures to report such extensions of credit for purposes of 12 CFR 363.2. The Agencies also reminded banks and principal shareholder fund complexes to comply with other applicable banking laws, including the Change in Bank Control Act and implementing regulations, noting this bulletin will remain in effect unless amended, superseded, or rescinded in writing.

On December 10, the OCC released preliminary findings from its supervisory review of debanking activities at the largest national banks it supervises. The OCC conducted its supervisory review in accordance with the President’s Executive Order “Guaranteeing Fair Banking for All Americans” to determine whether the large institutions it reviewed debanked or discriminated against any customers or potential customers on the basis of their political or religious beliefs or lawful business activities.

The OCC stated that its preliminary findings show that, between 2020 and 2023, large banks “made inappropriate distinctions among customers in the provision of financial services on the basis of their lawful business activities by maintaining policies restricting access to banking services or requiring escalated reviews and approvals before providing certain customers access to financial services.” As an example, the OCC cited “instances where at least one bank imposed restrictions on certain industry sectors because they engaged in ‘activities that, while not illegal, are contrary to [the bank’s] values.’” The OCC asserted that industry sectors subjected to restricted access included oil and gas exploration, coal mining, firearms, private prisons, tobacco and e-cigarette manufacturers, adult entertainment, and digital assets.

The OCC indicated that it intends to subsequently issue additional findings “in due course and as appropriate” with respect to its ongoing review to identify instances of political and religious debanking.

On December 15, the Consumer Financial Protection Bureau (CFPB) and Federal Reserve announced the annual update of dollar thresholds for consumer lease transactions subject to Regulation M, implementing the Consumer Leasing Act, and consumer credit transactions subject to Regulation Z, implementing the Truth in Lending Act. Based on the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) in effect as of June 1, 2025, the exemption threshold under Regulation M and Regulation Z will increase from $71,900 to $73,400, effective January 1, 2026. Private education loans and loans secured by real property remain subject to Regulation Z regardless of the dollar amount.

On December 15, the CFPB issued a final rule, effective January 1, 2026, amending the official interpretations for Regulation Z, which implements TILA, to adjust the dollar amounts of various thresholds that impact open-end consumer credit plans, HOEPA loans, and qualified mortgages.

On December 15, the CFPB, Federal Reserve, and OCC announced the annual update of the dollar threshold for higher-priced mortgage loans that are subject to special appraisal requirements. Based on the percentage increase in the CPI-W in effect as of June 1, 2025, the exemption threshold for special appraisals for higher-priced mortgage loans will increase from $33,500 to $34,200, effective January 1, 2026.

On December 15, the CFPB issued a final rule, effective January 1, 2026, amending an appendix for Regulation V, which implements the FCRA, to increase the maximum amount that a consumer reporting agency may charge a consumer for disclosing to the consumer information in the consumer’s file to $16.00.