Welcome to the eighth 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. In this newsletter, we cover some of the key developments from the past month that our team is monitoring.
Democratic gains in the mid-term elections will bring new committee leadership when the 120th U.S. Congress is seated in January 2027. Representative Maxine Waters (D-Cal.), current ranking member and former chair, is expected to take the helm of the U.S. House Committee on Financial Services, replacing current chair Representative French Hill (R-Ark.). On the Senate side, ranking member Senator Elizabeth Warren (D-Mass.) is the frontrunner to replace Senator Tim Scott (R-S.C.) as chair of the U.S. Senate Committee on Banking, Housing, and Urban Affairs. In addition, former Committee Chair Sherrod Brown (D-Ohio) will return to the chamber, but whether he returns to the Senate Banking Committee remains an open question.
Banks should expect more active oversight from the new Congress, both of the federal financial regulatory agencies and, potentially, the industry through congressional hearings. The Democrat-led Congress could look to find areas of potential compromise with the Trump administration, such as passing digital asset legislation, reviving and restructuring the Consumer Financial Protection Bureau, or modernizing deposit insurance.
The Durbin Amendment requires the Board of Governors of the Federal Reserve System (FRB) to “establish standards for assessing whether the amount of any interchange transaction fee . . . is reasonable and proportional to the cost incurred by the issuer with respect to the transaction.” To implement this authority, the FRB promulgated Regulation II in 2011, capping interchange fees for non-exempt banks at a 21-cent base component plus 0.05% of the transaction value. The base component is increased by a 1-cent fraud-prevention adjustment for issuers that meet certain fraud prevention standards.
Since its inception, Regulation II has been subject to numerous legal challenges and has divided the federal district courts. Following the U.S. Supreme Court’s 2025 holding in Corner Post, Inc. v. Board of Governors of the Federal Reserve System, which permitted certain challenges to Regulation II to proceed, two major cases highlight this divide.[1] On October 26, 2026, and following its remand from the Supreme Court, the U.S. Court of Appeals for the Eighth Circuit affirmed the ruling of the U.S. District Court for North Dakota in Corner Post, which held that the methodology adopted by the FRB in Regulation II was impermissible. The Eighth Circuit panel took specific issue with the FRB’s approach to determining “incremental costs” in Regulation II.
Meanwhile, on October 22, 2026, the U.S. Court of Appeals for the Sixth Circuit heard oral arguments on a nearly identical case, Linney’s Pizza, LLC v. Board of Governors of the Federal Reserve System, which was appealed from the U.S. District Court for the Eastern District of Kentucky. In Linney’s Pizza, the Eastern District of Kentucky found in 2025 that the methodology applied by the FRB in implementing Regulation II was permissible. If the Sixth Circuit affirms the lower court view on the validity of the Regulation II interchange fee cap, the resulting clear circuit split would increase the chances that the U.S. Supreme Court will have the final word on the validity of Regulation II.
On October 29, 2026, the Office of the Comptroller of the Currency (OCC) sent a letter to the California Air Resources Board (CARB) raising policy and legal concerns regarding the implementation of new California laws requiring that certain businesses collect and disclose climate-related information (the “disclosure laws”). In particular, the OCC questions the legality of applying the disclosure laws to national banks and federal savings associations (together, “federally chartered banks”). In its letter, the OCC requests that CARB either: (i) exempt federally chartered banks from the disclosure laws; or (ii) clarify that federally chartered banks are not required to comply with the disclosure laws.
The disclosure laws require (i) businesses with total annual revenues of more than $1 billion operating in California to annually disclose information on their greenhouse gas emissions; and (ii) businesses with total annual revenues of more than $500 million operating in California to publish a biennial report on climate-related financial risks and how those businesses plan to address such risks. While ongoing legal challenges have paused the implementation of the biennial report on financial risks, CARB is currently implementing regulations for annual greenhouse gas emissions reporting. In the view of the OCC, the disclosure laws would be inconsistent with OCC regulation and safety and soundness, impose undue burden on federally chartered banks, harm California customers, and raise constitutional concerns under the Supremacy Clause. In particular, the OCC identifies the revenue thresholds as a potential problem for banks, since the thresholds are not appropriately calibrated to reflect the size, risk, and complexity in the banking sector and, in combination with the other significant compliance burdens, may cause smaller banks to cease operating in California. Absent a solution from CARB, the OCC indicates in its letter that the agency will evaluate the implementation of the disclosure laws and may seek to use its federal preemption powers, if necessary.
On October 30, 2026, the Federal Deposit Insurance Corporation (FDIC) Board of Directors approved a notice of proposed rulemaking (NPR) that would rescind the Part 370 recordkeeping rule. Part 370, which is intended to facilitate the FDIC’s ability to conduct a deposit insurance determination in the event of the failure of a bank, applies to insured depository institutions (IDIs) with two million or more deposit accounts. The NPR would also amend the Large-Bank Deposit Insurance Determination Modernization rule at 12 C.F.R. § 360.9 to make it generally applicable to IDIs that are currently subject to Part 370 recordkeeping.
The FDIC notes that the proposed amendments would alleviate the requirement for IDIs subject to Part 370 to maintain deposit insurance calculation systems and would generally align the recordkeeping and reporting regime for FDIC-regulated IDIs of different sizes. FDIC Chairman Travis Hill noted that improvements to internal FDIC systems have significantly enhanced the agency’s deposit insurance determination capabilities. Additionally, Chairman Hill highlighted that these improvements would largely supplant the previous requirements for “banks to build and maintain IT systems to perform deposit insurance determinations,” and that the NPR would preserve “streamlined recordkeeping requirements” while continuing to enable the FDIC to promptly conduct deposit insurance determinations. Comments on the NPR are due by January 4, 2027.
[1] Read our client alert on the Supreme Court holding.