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Saturday, September 26 · Lead Fed tells examiners when they may issue an MRA, and when they may not The Federal Reserve's supervision division has rewritten the operating principles its examiners work under. The Updated Statement of Supervisory Operating Principles, posted September 24 and superseding the October 2025 statement, says an MRA or MRIA may issue only where a deficiency creates a significant probability of significant harm to a firm's financial condition, and an enforcement action for an unsafe or unsound practice only on an abnormal probability of abnormal harm. Examiners are to rely on a bank's internal audit to validate remediation rather than re-test it, close findings as soon as the deficiency is fixed, and stop capstone reviews before terminating an action. It is guidance to staff, not a rule, and states no compliance date.
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| ▸ | What changed for the exam itself: Horizontal reviews of the largest banks stop unless the Deputy Director of Supervision approves one, and their results are to be measured against supervisory expectations rather than the best practice in the peer group. Examiners may no longer describe an MRA in vague or overbroad language; each must state the deficiency plainly enough that a typical bank employee knows what it is and what a non-deficient state looks like. Criticisms delivered at the exit meeting and those in the written report may not differ materially. | | ▸ | Liquidity, ratings and self-reporting: Examiners may not discourage firms from counting Federal Home Loan Bank capacity in liquidity management or internal stress tests, and may not require assets to be prepositioned at the discount window as a condition of future borrowing. The management and risk-management components of CAMELS and RFI ratings may not outweigh the other components. A deficiency a bank finds itself and starts fixing promptly is presumptively a supervisory observation, not an MRA, and the statement commits to amending SR 13-13 to restore observations. | | ▸ | What a bank should do with it: Read the termination standard against every open MRA and enforcement requirement, because remediation validated by internal audit now ends a finding without a sustainability period. The statement also tells staff to rely on the primary state or federal supervisor for depository subsidiaries other than state member banks unless that supervisor withholds timely information, so holding companies should expect fewer duplicate examinations. The Fed posted the statement on its supervision page, not as a press release. |
REGULATORY DEVELOPMENTS The Federal Reserve spent the week adjusting both what examiners say and which banks hear it, and one of those changes is now in writing. | ▸ | California closes Nano Banc of Irvine: California regulators closed Nano Banc of Irvine on Friday and handed its deposits to Sunwest Bank of Sandy, Utah, in the first US bank failure the FDIC has resolved this quarter. Nano Banc held $736 million in assets and $686 million in deposits as of June 30; Sunwest assumed substantially all deposits and bought roughly $476 million of assets, leaving the rest with the receiver. The FDIC preliminarily estimates the cost to the Deposit Insurance Fund at $114 million. The single branch reopens Monday under the Sunwest name. | | ▸ | What the file showed before the close: The $736 million Orange County lender had accumulated enforcement actions over several years covering concentration risk, governance and insider transactions, per American Banker's account of the failure; the California Department of Financial Protection and Innovation, which chartered and supervised it, described years-long struggles ending in a material loss. A $114 million hit on $736 million of assets is a loss rate near 15 percent, which is what happens when concentrated collateral is marked by a receiver rather than by a management team. Supervisory findings ran ahead of the failure by years. | | ▸ | A second capital directive the same week: The FDIC issued a Supervisory Prompt Corrective Action Directive against Old Glory Bank of Elmore City, Oklahoma, which the agency says is severely undercapitalized and failed to respond to an earlier warning about its capital deficiency. Jason Mikula, who first flagged the directive, puts the bank's leverage ratio near 2.69 percent. Prompt corrective action is statutory arithmetic, not examiner judgment: below the thresholds, the capital plan and the dividend restrictions follow automatically. The directive published Friday. | | ▸ | The rest of the August enforcement list: The FDIC's monthly release, out September 25, carries new consent orders against First Guaranty Bank of Hammond, Louisiana and Bank of Ontario in Ontario, Wisconsin, an amended consent order against Chesterfield State Bank of Chesterfield, Illinois, and a termination for Citizens Savings Bank and Trust Company of Nashville. Four individuals at four separate banks received prohibition orders. No administrative hearings are scheduled for October. | | ▸ | Trade groups push back on the OCC's stablecoin application forms: The American Bankers Association and three other bank trade associations told the OCC in a joint letter Friday that its GENIUS Act application process should weigh additional factors for applicants that are not subsidiaries of an insured depository institution, including governance, risk management, operational resilience, cybersecurity and recovery planning; should publish applications for public comment as it does bank filings; and should hold foreign issuers to home-country capital requirements consistent with domestic ones. The OCC proposed its application factors in July. A day after the Fed completed the four-agency proposal set, the argument has moved to who gets a license and how. | | ▸ | Oversight thresholds under review: Reuters reported Friday that the Fed plans to raise the asset thresholds that trigger stricter supervision, citing sources. Nothing has been proposed and no figures are public; banks sitting just under $100 billion or $250 billion have every reason to watch this one, because thresholds fixed in nominal dollars tighten through growth alone. Treat it as reporting, not rulemaking. |
| ▸ | Peoples Bancorp clears the Board: The Federal Reserve approved Peoples Bancorp's merger with Citizens National Corporation of Paintsville, Kentucky, and the bank-level merger of Peoples Bank with Citizens Bank of Kentucky, including branches at the Kentucky locations. Holding-company approval runs under section 3 of the Bank Holding Company Act; the bank merger runs under the Bank Merger Act, and the Board applied its own 1995 competitive-review guidelines; the FDIC's 1998 statement of policy governs FDIC filings, not this one. The approval issued September 25. |
| ▸ | House Democrats want more time on the CRA rewrite: Democratic members of the House Financial Services Committee asked the banking agencies to extend the comment period on the Community Reinvestment Act proposal, arguing that a document running past 400 pages warrants longer review given its reach into community development lending. Banks building assessment-area models against the proposal should not assume the current window is final; an extension request from the minority is not an extension. |
| WEEKLY FINTECH POLICY BRIEF |
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Washington is heading into its pre-election stretch, and this week brought a new AI announcement from the White House, movement on Trump Accounts, and a reminder of how little legislative time remains this year. Here's what fintech should be watching.
| ▸ | The White House Plans an "AI Force" and AI Czar. President Trump announced plans to create a federal "AI Force" and appoint a new AI czar. Details on the structure and authorities of either are still limited, but OSTP Director Michael Kratsios said the goal is better interagency coordination on AI. For financial services, coordination is the key issue. Fintech companies already use AI across underwriting, fraud prevention, and customer service, and they face a growing mix of federal guidance and state rules. Much depends on who fills the role and what authority it carries. | | ▸ | Trump Accounts: Rules at OMB, Next Comment Deadline Oct. 20. The Trump Accounts program is moving forward. On Sept. 18, Treasury and the IRS sent two rules to OMB for review. One is a proposed rule with broader guidance under Section 530A. The other is an interim final rule titled "Trump Accounts." Both should be published in the Federal Register once OMB finishes its review.
Additionally, comments were due to Treasury and the IRS this week regarding Employer Contributions to Trump Accounts. The next opportunity to weigh in is the comment period on eligible investments for Trump Accounts, which closes Oct. 20. The choice of eligible investments will help determine how much choice families will have. Still pending is how other trustees are going to be brought into the program. | | ▸ | The Senate's Fall Schedule: One Week Left in Session. The Senate is in session next week for what is expected to be its final week before the elections. The House is out until after the Nov. 3 midterms, which leaves very little floor time for anything else this year. The next several weeks will be shaped by regulatory action more than legislation, with more movement expected in the lame duck period. |
Weekly Fintech Policy Brief is written by the Financial Technology Association and appears every Saturday. The views are FTA’s. Lex’s analysis elsewhere in this brief is independent. |
INDUSTRY AND AI SIGNALS | ▸ | The 30-year at 5.53 percent — The long bond reached its highest level since June 2004 in Friday trading, a move the Kobeissi Letter puts at about 25 basis points over three days, with the average 30-year mortgage rate at 7.45 percent. Cleveland Fed President Beth Hammack told Reuters she does not read the yield surge as lost confidence in inflation control, though she said separately she worries inflation expectations could deteriorate. New single-family home prices fell about 9 percent month over month in August to $478,700, the largest monthly drop on record. Consumer sentiment finished September at 48.1, down 3.6 points. |
| ▸ | Nubank–Monzo talks, at up to $13 billion — Sky News reports Nubank is in early talks to acquire Monzo at £8 billion to £10 billion, roughly double the UK bank's £4.5 billion mark from 2024; Monzo declined to comment. Simon Taylor's read on the industrial logic is the part US bankers should note: Monzo holds £25.7 billion of deposits against £2.3 billion of loans, lending under 10 pence of every pound, while Nubank runs a $39.4 billion credit book against $45.3 billion of deposits. Nubank won conditional approval for a US bank charter in January. Nothing is agreed. |
| ▸ | Meta's Muse and the disintermediation question — Taylor reports that three bank leadership teams, two of them very large, told him this week they see Meta's new AI assistant as a threat to their customer relationship, and he expects a lobbying fight framed around safety and soundness. Amazon has blocked Muse from its platform over agent identification and login storage; Walmart, Best Buy, Gap, Sephora and Wayfair have not. The liability questions — who authorized the payment, who eats the chargeback, whose KYC applies — have no answer in any current rule. Dispute teams should write their agent-initiated-transaction policy now. |
| ▸ | Prosecutors seize Tether-linked accounts — The Financial Times reported that US federal prosecutors seized bank accounts belonging to Capstone, a payments business operating on behalf of Tether and its sister exchange Bitfinex. Separately, Bitget halted customer withdrawals after a theft of more than $380 million the exchange attributes to hackers it suspects are linked to North Korea; Circle and Tether froze the attacker's wallet. Banks with correspondent or reserve-deposit relationships in this chain should confirm which legal entity their account agreement actually names. |
| ▸ | CECL cut loan growth by 77 basis points — A Federal Reserve staff paper by Ben Ranish and Cindy Vojtech, published this month, finds that adopting the current expected credit loss standard reduced annual loan growth by roughly 77 basis points in the years after adoption, with loan loss allowances acting on credit supply much the way capital requirements do. The authors found no effect on capital distributions. It is research, not policy, and the conclusions are labeled preliminary — but it is the first Fed-authored estimate that puts a number on a cost banks argued about for a decade. |
POLITICAL & LEGISLATIVE | ▸ | Peirce departs the SEC October 2: Commissioner Hester Peirce announced Friday she will leave the Commission next week, removing the member most closely identified with the agency's digital-asset accommodation — including the five-year innovation exemption for on-chain trading of tokenized stock. A Commission seat opening is a nomination fight, and after Trump v. Cook the removal question is settled only at the Federal Reserve; every other independent commission in the prudential and markets stack sits outside that for-cause wall. Bank affiliates with tokenization projects built on staff relief should ask who owns that relief after October 2. |
| ▸ | Kalshi loses on preemption in the Sixth Circuit: The appeals court ruled in KalshiEX LLC v. Schuler that state gaming laws reach the platform's event contracts, rejecting the argument that calling them swaps displaces state law; New York's attorney general separately sued Polymarket this week alleging illegal gambling. Bloomberg reports the FDIC has raised concerns about Polymarket contracts wagering on bank failures. Banks providing deposit accounts or payment rails to prediction venues should re-read those agreements against a state-law theory. |
WHAT'S COMING | ▸ | The Federal Reserve's proposal on regulatory modernization and relief for mutual holding companies closes October 5, and the FDIC's extension of its comment period on disclosure of information closes the same day. |
| ▸ | The Federal Reserve is expected to publish notices on bank holding company formations, acquisitions and mergers Monday — the first place new acquirer filings become public. |
WHAT IT MEANS | ▸ | Nano Banc's $114 million loss on a $736 million bank is the number to put next to the supervisory-communication rebuild now underway at two agencies. The Fed revised its Statement of Supervisory Operating Principles on September 24 and gave examiners an "observation" rung below a Matter Requiring Attention; the FDIC rescinded its 2016 statement on supervisory recommendations earlier this month. Both changes are about how a concern gets recorded and how it escalates. Nano Banc carried findings on concentration, governance and insider dealing for years and still failed at a 15 percent loss rate, and Old Glory Bank reached a 2.69 percent leverage ratio after not responding to a warning. Neither case suggests examiners lacked a category to write the concern in. Banks re-papering their intake process should build it around what closes a finding, not around what it is called. |
Dates That Matter SEP 28
2d | Watch: Supreme Court conference on Nos. 25-1313, 25-1350, 25-1004; order list expected Oct 5, 2026 [Watch] | OCT 1
5d | Comments close: Special measure: Banque Misr UAE [FinCEN] · Reciprocal Deposits: Implementing the 21st Century ROAD to Housing Act [FDIC] · Privacy Act Regulations [CFTC] · Violations of Laws or Regulations [OCC] | OCT 1
5d | Effective: Financial Data Transparency Act Joint Data Standards [OCC] · Telemarketing Sales Rule Fees [FTC] | OCT 5
9d | Comments close: Commodity Pool Operators and Commodity Trading Advisors [CFTC] |
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