Welcome to the second issue of Monthly Deposits: MoFo’s Bank Regulatory Newsletter, which provides an overview of recent developments in U.S. bank regulation, including proposed rules, reforms, and other significant updates. Here we cover some of the key developments from the past month that our team is keeping an eye on.
On April 7, 2026, the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC, and collectively with the OCC, the “Agencies”) issued a joint final rule eliminating reputation risk from the Agencies’ supervisory programs. The final rule, which is effective June 9, 2026, prohibits the Agencies from criticizing or taking adverse action on the basis of reputation risk, and bars them from requiring a financial institution to close customer accounts, deny services, or terminate business relationships on the basis of a person’s or entity’s political, social, cultural, or religious views or beliefs, constitutionally protected speech, or on the basis of disfavored but lawful business activities perceived to present reputation risk. The joint final rule reflects the Agencies’ view that reputation risk introduces excessive subjectivity into supervision without materially increasing safety and soundness.
In response to comments received on the proposed rule and to better reflect the significance of operational risk to covered institutions, the Agencies updated the definition of “reputation risk” to include any risk that an institution’s action or activity “could negatively impact public perception of the institution for reasons not clearly and directly related to the financial or operational condition of the institution.” (emphasis added). Additionally, the Agencies broadened the applicability of the rule to clarify that it applies to the views of all personnel at the Agencies, rather than supervisory staff exclusively. The final rule builds on the administration’s broader efforts to combat debanking, including Executive Order 14331, Guaranteeing Fair Banking for All Americans, which instructed the Agencies to remove the consideration of reputation risk to help ensure fair access to financial services.
On April 17, 2026, the FDIC, the OCC, and the Federal Reserve Board (FRB, and collectively with the FDIC and OCC, the “Agencies”) issued revised model risk management guidance, clarifying that model risk management should be tailored commensurately to the size, operational complexity, and model risk profile of a banking organization. Primarily aimed at banking organizations with over $30 billion in total assets, the revised guidance emphasizes sound principles for effective model risk management, discusses model validation and monitoring, highlights key governance and control measures, discusses model validation, and includes key considerations for third-party products and vendors. While acknowledging that technical knowledge and modeling expertise enable appropriate analysis and judgment concerning performance and risk, the revised guidance highlights that users of model output benefit from understanding and communicating limitations, monitoring performance, periodically reviewing relevance, and supplementing model output with complementary analysis and information.
The revised guidance makes it clear that the principles it outlines generally apply to traditional statistical and quantitative models, including those that apply statistical, economic, or financial theories to process input data into quantitative estimates. Notably, however, the revised guidance clarifies that generative artificial intelligence (AI) and agentic AI models are not within its scope. Despite this carveout, the Agencies’ emphasis on sound principles, as opposed to enforceable standards or prescriptive requirements, potentially provides banking organizations with breathing room to explore new and innovative approaches to model risk management.
On April 24, 2026, the OCC issued an interim final rule and an interim final order related to national banks’ powers under federal law to charge certain fees, regardless of whether those fees are set by the bank or a third party. The interim final rule amends the OCC’s regulations to specifically provide that national banks may impose non-interest charges, including interchange fees from credit and debit card operations, regardless of whether those charges and fees are set by the bank or a third party. Through the interim final order, the OCC interprets the National Bank Act (NBA) to preempt the Illinois Interchange Fee Prohibition Act (IFPA) and confirms that national banks and federal savings associations are not subject to the IFPA. Both the interim final rule and the interim final order take effect on June 30, 2026, one day before the July 1 effective date of the IFPA. The OCC is accepting comments on both regulatory actions until May 29, 2026.
The IFPA prohibits charging or receiving interchange fees on the tax and gratuity portions of payment card transactions and restricts the use of payment card transaction data. The OCC’s issuances arrive amid ongoing litigation brought by the Illinois Bankers Association challenging the IFPA and the guidelines reflect the OCC’s view that the IFPA “would create a complex, potentially unworkable, and destabilizing standard for national banks.” In February 2026, a federal judge in Illinois upheld the IFPA’s restrictions on interchange fees while enjoining the data use restrictions, finding that only the data use restrictions were preempted under the NBA. The case is currently before the U.S. Court of Appeals for the Seventh Circuit on an expedited appeal schedule.
Also on April 24, 2026, the OCC issued a notice of proposed rulemaking titled “Streamlining Regulations Concerning Public Welfare Investments, Open Market Collateralized Loan Obligations, and Federal Savings Association Nondiscrimination Requirements.” The proposed rulemaking is a deregulatory action pursuant to Executive Order 14219, “Ensuring Lawful Governance and Implementing the President’s “Department of Government Efficiency” Deregulatory Initiative,” which requires federal agencies to identify regulations for potential rescission that are duplicative of existing federal anti-discrimination laws or lacking clear statutory authority, including those that: (i) are not based on the best reading of the underlying statutory authority; and (ii) implicate matters of social, political, or economic significance that are not authorized by clear statutory authority.
The proposed rule contemplates three categories of changes: (i) removal of references to minority- and women-owned entities in its public welfare investment regulations; (ii) recission of the portion of the credit risk retention regulations that provides an alternative compliance option for lead arrangers of open market collateralized loan obligations; and (iii) removal of duplicative non-discrimination requirements for federal savings associations that largely overlap with requirements under the Equal Credit Opportunity Act and the Fair Housing Act. Comments on the proposed rule are due by May 27, 2026.
On April 29, 2026, the FDIC, the OCC, and the FRB (collectively, the “Agencies”) published a joint final rule to modify the community bank leverage ratio (CBLR) and provide community banks with greater flexibility to use a simpler measure of capital adequacy and reduce regulatory burden. The final rule, effective July 1, 2026, will lower the CBLR from nine percent to eight percent, allowing for a greater number of community banks to opt in to the simplified CBLR framework.
The final rule continues to permit qualifying community banks with less than $10 billion in consolidated assets to use only the leverage ratio to measure capital adequacy, rather than calculating and reporting risk-based capital ratios. The required leverage ratio for community banks that opt into the CBLR is higher than the standard leverage ratio, but the simplicity of the CBLR still makes it attractive to smaller banks. For community banks that temporarily fall out of compliance with the leverage ratio, the final rule extends the grace period for remaining in the framework from two quarters to four quarters. In the accompanying Board Memo, FRB staff estimate that reducing the CBLR to eight percent will provide participating community banks with approximately $64 billion in balance-sheet capacity.