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Nutter Bank Report: March 2026
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- Federal Banking Agencies Propose Sweeping Changes to Regulatory Capital Rules
- OCC Adopts Final Rules to Reduce Regulatory Burden on Community Banks
- President Issues Executive Order Aimed at Lowering Home Mortgage Lending Costs
- FDIC Rescinds Statement of Policy on Qualifications for Failed Bank Acquisitions
- Other Developments: Tokenized Securities and Recovery Planning Guidelines
1. Federal Banking Agencies Propose Sweeping Changes to Regulatory Capital Rules
The federal banking agencies have jointly issued proposed rules intended to modernize the regulatory capital framework for banks of all sizes that mark a substantial departure from their approach in 2023 to implement the Basel III endgame. According to the agencies, the proposals released on March 19 would amend regulatory capital rules to streamline capital requirements and “better align regulatory capital with risk.” Under one proposed rule, the largest banking organizations—those identified as Global Systemically Important Banks and other banking organizations with at least $700 billion in total consolidated assets or at least $75 billion in cross-jurisdictional activity, constituting Category I and II banking organizations under the current regulatory capital framework—would be subject to a single set of risk-based capital ratio requirements based on the “expanded risk-based approach” and the revised market risk framework. This would include requirements for credit risk, equity risk, and operational risk. Other banking organizations could choose to adopt the expanded risk-based approach that would be required for Category I and II banking organizations. Under the proposal, the standardized approach would no longer apply to Category I or II banking organizations, and the advanced approaches would be removed from the regulatory capital framework. Public comments on the proposed rule are due by June 18, 2026. Click for a copy of the proposed expanded risk-based approach rule.
Nutter Notes: The second proposal to amend the regulatory capital framework would revise the risk-based capital treatment of certain exposure categories under the standardized approach. The agencies indicated that the changes would focus on “improving the calibration and risk sensitivity of risk weights” that are particularly material to banks’ lending activities. The proposal would also modify the definition of regulatory capital by removing the threshold-based deduction for mortgage servicing assets for all banking organizations subject to the regulatory capital rules, including banks that have made the community bank leverage ratio election. The proposal would require Category III and IV banking organizations to recognize most elements of accumulated other comprehensive income in their regulatory capital. Overall, the agencies stated that the proposed changes to the regulatory capital framework would “modestly reduce capital requirements for large banks and moderately reduce requirements for smaller banks, reflecting their more traditional lending activities.” Click for a copy of the proposed standardized approach rule.
2. OCC Adopts Final Rules to Reduce Regulatory Burden on Community Banks
The OCC has adopted two final rules intended to reduce the regulatory burden for smaller national banks and federal savings associations. A final rule released on March 3 rescinds the OCC’s Fair Housing Home Loan Data System regulations applicable to national banks, codified at 12 C.F.R. part 27, effective as of April 3. The OCC determined that that the regulation is “obsolete and largely duplicative of and inconsistent with” other requirements for banks to collect and retain certain information on applications for home loans. The OCC also stated that the regulation imposed disproportionate data collection requirements on national banks compared to other depository institutions, and that the data collected had limited utility. Click for a copy of the final rule rescinding 12 C.F.R. part 27.
Nutter Notes: Also on March 3, the OCC announced a final rule to simplify licensing requirements for corporate activities and transactions involving national banks and federal savings associations that have less than $30 billion in total assets and satisfy certain conditions. The final rule is intended to reduce burden on covered community banks and covered community savings associations, as defined in the final rule, that are required to seek regulatory approval from the OCC for certain corporate activities and transactions under 12 C.F.R. part 5. The final rule defines a “covered community bank or covered community savings association” as a national bank or federal savings association that has less than $30 billion in total assets and is not an affiliate of a depository institution or foreign bank with $30 billion or more in total assets; is “well capitalized” as defined in 12 C.F.R. § 5.3; and is not subject to a cease and desist order, a consent order, or a formal written agreement that requires action to improve the financial condition of the institution unless otherwise informed in writing by the OCC. The final rule will become effective on April 3. Click for a copy of the final rule on corporate activities and transactions.
3. President Issues Executive Order Aimed at Lowering Home Mortgage Lending Costs
President Trump issued an Executive Order to reduce regulatory burdens associated with home mortgage lending and directing federal agencies to consider certain changes to mortgage lending rules, including Truth in Lending Act (TILA) and Home Mortgage Disclosure Act (HMDA) requirements. The Executive Order released on March 13, titled Promoting Access to Mortgage Credit, directs the CFPB to consider amending Regulation Z, which implements TILA, to “tailor” Ability-to-Repay and Qualified Mortgage requirements for smaller banks. The Executive Order also directs the CFPB to consider changing TILA-RESPA Integrated Disclosure timing requirements, exempting smaller mortgage loans from Qualified Mortgage caps on points and fees, and exempting rate-and-term refinancing (including cash-out refinancing) from TILA rescission rights. The Executive Order also calls for the federal banking agencies to change their approach to bank examinations to focus on prudent underwriting, rather than “overly technical process-oriented approaches to lending.” Click for a copy of the Executive Order.
Nutter Notes: The Executive Order also directs the CFPB to consider amending its rules that implement HMDA raise the asset threshold for exemption from HMDA data collection and reporting requirements for smaller banks, to “exclude inquiries from the scope of HMDA,” and to otherwise ensure protection of privacy and reduction of regulatory burdens. The Executive Order requires that the federal banking agencies work on modernizing appraisal rules and published guidance to “expand the use of alternative valuation models, desktop and hybrid appraisals, and artificial intelligence valuation tools,” simplify appraiser qualification requirements, and reduce appraisal requirements for low-risk transactions. Certain of the capital and liquidity issues related to mortgage loans that are addressed in the Executive Order appear to be reflected in the federal banking agencies proposals to amend the regulatory capital framework announced this month.
4. FDIC Rescinds Statement of Policy on Qualifications for Failed Bank Acquisitions
The FDIC has approved the rescission of its Statement of Policy on Qualifications for Failed Bank Acquisitions (Policy Statement) issued in 2009 and related guidance published in 2010. The Policy Statement provided guidance to private capital investors interested in acquiring the deposit liabilities, or both the liabilities and assets, of failed banks, regarding the terms and conditions for such investments or acquisitions. As a result, the Policy Statement imposed terms and conditions that private capital investors were expected to satisfy before they could become eligible to bid on a failing bank. According to the FDIC, these included “onerous and highly prescriptive measures, including capital standards that would not be applicable in any other failed bank acquisitions.” In rescinding the Policy Statement, the FDIC indicated concern that such terms and conditions for private capital investors may discourage and potentially limit investments by nonbanks in connection with the resolution of failed banks. The rescission of the Policy Statement became effective on March 23. Click for a copy of the FDIC’s notice of the rescission.
Nutter Notes: The Policy Statement imposed on private capital investors an agreement to a cross guarantee with respect to substantially commonly-owned banks, and limits on transactions with affiliates that are more restrictive than Sections 23A and 23B of the Federal Reserve Act. The Policy Statement also required such investor groups to commit to lengthy continuity of ownership requirements before they would be allowed to bid on a failing bank. According to the FDIC, the objectives of the rescission of the Policy Statement are to remove regulatory barriers to nonbanks participating in bids on failed banks and to reduce the cost of failures to the Deposit Insurance Fund.
5. Other Developments: Tokenized Securities and Recovery Planning Guidelines
- Federal Banking Agencies Offer Guidance on Treatment of Tokenized Securities
On March 5, the federal banking agencies issued guidance in the form of answers to frequently asked questions (FAQs) concerning the capital treatment of tokenized securities. An investment security is referred to as “tokenized” when ownership rights in the security are represented using distributed ledger technology, also known as blockchain technology. Click for a copy of the FAQs.
Nutter Notes: Among other things, the FAQs clarify that the federal banking agencies’ capital rules are technology neutral. Therefore, technologies used to issue and transact in a security do not generally impact its capital treatment and a tokenized security should be treated in the same manner as the non-tokenized form of the security would be treated under the capital rules.
- OCC Determines to Rescind Recovery Planning Guidelines for Certain Large Institutions
The OCC announced on March 31 that it will rescind its recovery planning guidelines for certain large national banks, federal savings associations, and federal branches of foreign banks. The current guidelines apply to national banks, federal savings associations, and federal branches of foreign banks with total consolidated assets of $100 billion or more. The rescission will become effective 30 days after notice is published in the Federal Register, which is expected shortly. Click to access the text of the OCC’s notice of rescission.
Nutter Notes: Comptroller of the Currency Jonathan Gould said of the OCC’s decision, “recovery planning guidelines that require large banks to engage in prescriptive planning activities do little to improve their ability to manage through stress and distract from the real work of running a safe and sound institution.”
Nutter Bank Report
Nutter Bank Report is a monthly electronic publication of the Banking and Financial Services Group of the law firm of Nutter McClennen & Fish LLP. Chambers and Partners, the international law firm rating service, after interviewing our clients and our peers in the profession, has ranked Nutter’s Banking and Financial Services practice among the top banking practices in the nation. Visit the U.S. rankings at Chambers.com. The Nutter Bank Report is edited by Matthew D. Hanaghan. Assistance in the preparation of this issue was provided by Daniel W. Hartman and Heather F. Merton. The information in this publication is not legal advice. For further information, contact:
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Matthew D. Hanaghan Tel: (617) 439-2583 |
Daniel W. Hartman |
Michael K. Krebs Tel: (617) 439-2288 |
Kate Henry |
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