Federal Reserve Proposes Modernized Rules for Mutual Banking Organizations

On August 4, the Board of Governors of the Federal Reserve System (Federal Reserve) published a proposed rule in the Federal Register to modernize and simplify rules for mutual banking organizations in the first comprehensive update to the framework in approximately 30 years. Among other updates, the proposed rule would clarify which instruments qualify as regulatory capital, reduce procedural burdens, increase capital-raising flexibility for certain mutual banking organizations, and codify certain existing supervisory interpretations and guidance. Of particular note, the proposal would eliminate certain dividend waiver restrictions applicable to mutual holding companies. Comments on the proposal must be submitted by October 5, 2026.

On July 31, the Federal Reserve and Federal Deposit Insurance Corporation (FDIC) each proposed amendments to their regulations governing extensions of credit to insiders of financial institutions.

The Federal Reserve proposed comprehensive amendments to Regulation O, which governs extensions of credit by banks to insiders, including executive officers, directors, principal shareholders, and certain related interests. Among other changes, the proposal would increase several outdated dollar-based thresholds to account for inflation and economic growth. These changes include increasing the dollar caps on exemptions related to certain credit card debt, certain overdrafts, and certain “other purpose” extensions of credit and increasing the threshold at which an extension of credit to an insider requires prior approval by a bank’s board of directors from $500,000 to $2 million. The proposal would also establish a methodology for adjusting these thresholds every five years based on cumulative growth in nominal gross domestic product, while providing that the thresholds would not be reduced if cumulative nominal GDP growth is negative. In addition, the proposal would establish methodologies for valuing credit exposures arising from derivative and securities-financing transactions for purposes of Regulation O. Comments on the Federal Reserve’s proposal must be submitted by October 5, 2026.

In consultation with the Federal Reserve, the FDIC proposed corresponding amendments to its regulations governing extensions of credit to insiders of FDIC-supervised institutions. Comments on the FDIC’s proposal must be received by October 5, 2026.

On July 31, the FDIC and the Office of the Comptroller of the Currency (OCC) issued a joint notice of proposed rulemaking to amend their Community Reinvestment Act (CRA) regulations. Among other changes, the proposal would narrow the range of retail banking services the agencies consider to focus on credit services, thereby excluding deposit services, and would make changes to give greater weight to activities with a nexus to lending. The proposal would also increase bank asset size thresholds for (1) small banks to $1 billion (from $412 million) and (2) intermediate banks (defined under the current rules as subset of small banks called intermediate small banks) to $10 billion (from $1.65 billion) and it would exempt banks newly classified as intermediate banks (those with assets between $1.65 billion and $10 billion) from data collection and reporting requirements. Comments on the proposal are due 60 days after the date of publication in the Federal Register.

On August 3, the OCC proposed a rule to comprehensively revise its regulations governing the disclosure of OCC information. Among other changes, the proposal would clarify the treatment of confidential OCC information, expand the circumstances in which certain OCC information may be disclosed without prior OCC approval, and streamline disclosure procedures, while maintaining appropriate protections for confidential supervisory information and permitting additional disclosures in specified circumstances. Comments on the proposal must be received by October 5, 2026.

On July 24, the FDIC published changes to its Consumer Compliance Examination Manual to: (1) remove a reference to the CRA in the description of a memorandum of understanding between an institution and the FDIC to address and correct weaknesses in an institution’s compliance posture; (2) update violation codes used to cite legal violations to address the Advertisement of Membership Rule (12 CFR 328), including signage requirements and permissible statements in relation to FDIC coverage and segregation of insured deposits and non-deposit products in advertising; (3) update the annual thresholds under the Truth in Lending Act for qualified mortgage limits and classifying “high-cost mortgages”; (4) update the coverage threshold for closed-end mortgage loans and open-end lines of credit, reflecting the 2022 court order vacating the closed-end mortgage loan volume threshold set by the 2020 HMDA Rule and reinstating the original Regulation C coverage threshold for closed-end mortgage loans; and (5) update the annual thresholds for determining banking institution size, which are used in connection with the selection of appropriate performance evaluation methods under the CRA, to reflect updated total asset values.

On July 30, the FDIC, OCC, and Federal Reserve updated the community bank leverage ratio (CBLR) framework compliance guide to reflect amendments adopted in the April 2026 CBLR final rule, including: (1) decreasing the CBLR requirement from 9% to 8%; (2) extending the grace period from two quarters to four quarters to provide additional time for institutions to regain eligibility under the CBLR framework or satisfy the applicable risk-based capital requirements; and (3) limiting use of the grace period to no more than eight of the preceding 20 quarters.