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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Key Dates
Related Federal Register Documents
2025-21626, Regulatory Capital Rule: Modifications to the Enhanced Supplementary Leverage Ratio Standards for U.S. Global Systemically Important Bank Holding Companies and Their Subsidiary Depository Institutions; Total Loss-Absorbing Capacity and Long-Term Debt Requirements for U.S. Global Systemically Important Bank Holding Companies
Big U.S. banks that are super important to the economy are getting new rules to keep them safer and stronger. These changes tweak how much money they must keep on hand and how they handle long-term debt, helping prevent financial trouble. The new rules kick in soon and could affect how these banks manage billions in assets and debt.
2026-15774, Regulatory Modernization and Relief for Mutual Holding Companies
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2026-15777, Loans to Executive Officers, Directors, and Principal Shareholders of Member Banks; Bank Holding Companies
The Board is inviting public comment on proposed amendments to Regulation O, which governs loans by member banks to their insiders and insiders of their affiliates. The proposed amendments would update and modernize the regulation, increase transparency by clarifying requirements and incorporating existing interpretations, and promote efficiency by reducing regulatory burden. The proposed amendments also would incorporate existing statutory requirements that are not currently reflected in the regulation. Moreover, the proposed amendments would update several outdated dollar-based thresholds in Regulation O and index these thresholds going forward. In addition, the proposed amendments would address the application of Regulation O to member banks that lend to companies that are presumed to be controlled by large asset management companies through passive investment funds. Finally, the proposed amendments would revise and reorganize the regulation to streamline the text and make it more accessible.
2026-14373, Formations of, Acquisitions by, and Mergers of Bank Holding Companies
Some companies want to become bank holding companies or buy banks, and the Federal Reserve is checking their applications. If you have thoughts, you can send comments by August 17, 2026. This affects banks and their owners, and the process helps keep banking safe and fair.
2026-14064, Formations of, Acquisitions by, and Mergers of Bank Holding Companies
Some companies want to become bank holding companies or buy banks, and the Federal Reserve is reviewing their applications. If you have thoughts, you can send comments by August 12, 2026. This affects banks, their owners, and the public, with no direct costs but important changes in who controls banks.
2026-14060, Inflation Adjustments for Civil Money Penalties
The Federal Reserve announced that civil money penalties won’t go up in 2026 because inflation data wasn’t available due to a government shutdown. This means businesses and individuals facing these penalties will see the same amounts as in 2025. The freeze keeps things steady until new inflation numbers come in next year.
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