Fed vice chair for supervision urges tailored oversight for community banks and reviews leverage rule

Unidentified Speaker, Vice Chair for Supervision at the Federal Reserve System, told conference attendees the Fed is adjusting its regulatory and supervisory approach to better match the size, complexity and risk profiles of community banks. "An important principle guiding our work is regulatory and supervisory tailoring," the speaker said, framing the administration's priorities for smaller institutions.

The speech outlined specific near-term reviews: the Federal Reserve is examining merger and acquisition and de novo chartering processes for community banks with the goal of streamlining applications and updating the competitive analysis framework to better assess competition among small banks. The speaker said the reviews should recognize community banks' role in meeting the U.S. economy's needs "including in the most remote and rural places."

On capital, the speaker said the Fed is reviewing comments on proposed changes to the community bank leverage ratio that would provide greater flexibility while maintaining "nearly double the minimum capital requirements." The speaker argued those changes would help community banks "focus on what they do best, which is supporting local communities and lending to households and businesses."

The speaker also said the Fed will "soon revisit the mutual bank capital framework" to ensure it provides flexibility while preserving safety and soundness. No specific rule text, implementation dates, or agency votes were announced in the remarks.

Next steps: the Fed will continue its rule-review and comment process; the remarks did not specify formal adoption timelines for the leverage-ratio or mutual-bank changes.