A flurry of federal regulatory developments in 2025 aimed to ease the burden of certain requirements imposed on community banks. This article summarizes but a few. Banks are encouraged to review these regulations and consult an attorney with any questions or concerns.
Proposal to Eliminate “Reputation Risk” and “Debanking” Regulations
On October 7, 2025, the Office of the Comptroller of the Currency (OCC) and the FDIC jointly offered rules that would (i) exclude “reputation risk” from their oversight mandate and (ii) refocus supervision on material financial risks (MRAs). The agencies stated that “the proposed rule would promote greater clarity and certainty regarding certain enforcement and supervision standards and ensure bank supervisors prioritize concerns related to material financial risks over those regarding policies, process, documentation, and other nonfinancial risks.”[1]
The proposal would provide that examiners could issue an MRA only for practices that could reasonably be expected to become unsound under current or foreseeable conditions. The rule would also prohibit regulators from taking adverse action against a bank due to “reputation risk”, which is defined as the alleged risk of negative public perception not linked to financial or operational conditions. For example, it prohibits examiners from requiring banks to open, close, or modify customer relationships based on political, social, or religious views. The proposed rule also establishes uniform standards for when and how the agencies may communicate MRAs and non-binding supervisory observations.
These proposals exhibit a pointed shift away from subjective regulatory benchmarks and toward a more objective focus on measurable financial risk.
Frequency and Scope of Community Bank Examinations
On October 6, 2025, the OCC specifically updated policies for community banks to “eliminate mandatory examination activities not required by statute or regulation to reduce supervisory burden for community banks.”[2] In an attempt to reduce the regulatory burden on community banks and simplify requests made by examiners, effective January 1, 2026, the OCC is (i) eliminating mandatory OCC policy-based examination requirements, (ii) empowering bank examiners to tailor examination scope and frequency based on risk-based supervision, and (iii) reassessing its data collection requests. For example, the OCC is evaluating whether data collected under the Money Laundering Risk System and the Interest Rate Risk Survey is necessary or can be collected in a less-burdensome manner.
CFPB Extends Compliance Deadlines for Small Business Lending Rule
On October 2, 2025, the Consumer Financial Protection Bureau (CFPB) extended the compliance deadlines for its 2023 Small Business Lending Data Collection Rule under the Equal Credit Opportunity Act (ECOA) and Regulation B. To summarize, this composite of regulations forces banks to collect and report to the CFPB certain data regarding applications for credit for women-owned, minority-owned, and small businesses. The CFPB’s announcement of this deadline extension notes that three courts have thus far stayed compliance with Regulation B; however, the compliance dates have not been stayed for those who are not plaintiffs or intervenors in those cases. To facilitate consistent compliance across all jurisdictions, the CFPB is extending the compliance dates set forth in the 2024 interim final rule by approximately 350 days. The CFPB states that this extension should allow it sufficient time to issue a new proposal to reconsider certain aspects of the 2023 final rule.[3]
[1] Agencies Issue Proposal to Focus Supervision on Material Financial Risks, available at https://fdic.gov/news/press-releases/2025/agencies-issue-proposal-focus-supervision-material-financial-risks.
[2] Examinations: Frequency and Scope for Community Banks, available at Examinations: Frequency and Scope for Community Banks | OCC.
[3] Small Business Lending Under the Equal Credit Opportunity Act (Regulation B); Extension of Compliance Dates, available at Federal Register :: Small Business Lending Under the Equal Credit Opportunity Act (Regulation B); Extension of Compliance Dates.
Printed in the Winter 2025 issue of Kentucky Banker magazine.
