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House hearing: regulators promise to tailor capital and supervision to help community banks
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Summary
At a Dec. 2 House Financial Services oversight hearing, Federal Reserve, OCC, FDIC and NCUA officials said they are reviewing capital rules, indexing thresholds and streamlining supervision to reduce burdens on community banks while preserving safety and soundness.
Regulators told the House Committee on Financial Services on Dec. 2 that they are reorienting supervision to focus on material financial risks and to reduce one-size-fits-all requirements that, they said, can unfairly burden community banks.
"The banking system remains sound and resilient," said Michelle Bowman, Vice Chair for Supervision of the Board of Governors of the Federal Reserve System, in her opening testimony. Bowman outlined a package of work the Fed and its partners are pursuing, including changes to the Community Bank Leverage Ratio, stress-testing transparency and a holistic review of capital "pillars" as agencies prepare a Bas el III reproposal.
Comptroller Jonathan Gould of the Office of the Comptroller of the Currency said the OCC is shifting toward risk-based supervision and away from what he described as "procedural clutter." Gould told the committee he has prioritized fixing agency operations and examiner training after identifying operational failures on arrival.
Acting FDIC Chair Travis Hill described changes intended to make examinations more focused on "material financial risks," citing a proposal to raise certain continuous-exam thresholds and to create a supervisory appeals mechanism. NCUA leadership emphasized similar aims for credit unions and said the agency is reviewing regulations to remove obsolete burdens.
Members of both parties pressed regulators on how and when thresholds would be indexed. Chair James R. Hill said Congress’ 2018 reforms (he referenced s 2155) intended tailoring by institution size; several regulators committed to reviewing and, where appropriate, indexing thresholds to better align oversight with nominal GDP or other metrics.
The panel signaled a mix of near-term rulemaking and continuing review: regulators described proposals already under way (CBLR changes, an enhanced SLR revision and stress-test adjustments), and they pledged to consult Congress before finalizing major changes. The agencies also said they would provide written follow-ups to members asking for analyses of the effects of indexing and capital recalibrations.
The hearing closed with the committee requesting additional written questions; regulators were asked to respond by Jan. 7, 2026. The exchanges suggest significant interagency work ahead on calibrating capital, supervisory thresholds and examiner practices to reduce compliance costs for smaller institutions without weakening safety and soundness.
