Fed Revamps Rating System for Big Banks and Insurers
Published Date: 11/17/2025
Notice
Summary
Starting January 16, 2026, big banks and insurance companies will be rated with a clearer, fairer system that better shows which ones are strong and well-managed. The new rules drop automatic penalties for certain low scores, making enforcement more flexible based on each case. This update helps keep our financial system safe without being too harsh or confusing.
Analyzed Economic Effects
3 provisions identified: 2 benefits, 1 costs, 0 mixed.
Deficient-2 Still Triggers Enforcement Presumption
The final notice keeps the presumption that the Board will impose a formal enforcement action on any firm with one or more Deficient-2 component ratings. That presumption remains in place under the revised Frameworks effective January 16, 2026.
New "Well Managed" Test for Large Firms
Starting January 16, 2026, a firm subject to the Federal Reserve's Large Financial Institution or Insurance Supervisory Frameworks will be considered "well managed" if it has at least two component ratings of Broadly Meets Expectations or Conditionally Meets Expectations and no more than one Deficient-1 component rating. The LFI Framework applies to bank holding companies and savings and loan holding companies with total consolidated assets of $100 billion or more, and U.S. intermediate holding companies of foreign banking organizations with total consolidated assets of $50 billion or more; parallel criteria apply for supervised insurance organizations.
No Automatic Enforcement for Single Deficient-1
Beginning January 16, 2026, the Frameworks no longer presume that a firm with one or more Deficient-1 component ratings will be subject to a formal or informal enforcement action; instead, such firms may be subject to enforcement action depending on particular facts and circumstances. The Frameworks continue to allow supervisors to monitor remediation and to take enforcement action when legal standards are met.
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