Regulators finalize rule focusing on material financial risks

U.S. bank regulators including the OCC, FDIC, and Federal Reserve are tightening supervisory and enforcement standards to center on material financial risks, clarifying what constitutes an unsafe or unsound practice and when Matters Requiring Attention can be issued. The final rule narrows focus to risks affecting banks’ balance sheets and liquidity and applies only within the agencies’ supervisory perimeter. Enforcement has tightened in some respects, with public actions decreasing substantially since 2015 and reputational risk removed from the supervisory framework. A higher enforcement bar is being introduced, including an abnormal probability of abnormal harm standard by 2026, as regulators target genuine threats rather than procedural or nonfinancial concerns. The shift has particular implications for crypto-adjacent banking and is framed as reducing “check-the-box” compliance and virtue signaling. This movement is part of a broader deregulatory push aimed at focusing oversight on material risk in the wake of past bank failures and governance concerns.