The Federal Reserve is preparing to raise the asset-size cutoffs that determine which banks face its toughest oversight requirements, according to people familiar with the matter. The move would ease regulatory burdens on mid-size and regional lenders.
The Federal Reserve is working on a plan to lift the dollar thresholds that trigger its most stringent bank supervision rules, sources say. Under current rules, banks that cross certain asset-size limits must meet stricter capital, liquidity, and stress-testing requirements. Raising those thresholds would mean fewer banks fall into the most heavily regulated categories.
The potential change reflects a broader debate that has run through U.S. banking regulation for years: how tightly to oversee institutions that are large enough to matter in a downturn, but not as systemically important as the country’s biggest global banks. Mid-size regional banks have long argued that rules designed with Wall Street giants in mind impose costs that outweigh their benefits for smaller institutions.
Regulators typically review oversight thresholds periodically, adjusting them for growth in the banking system and in the economy overall. When thresholds stay fixed while banks grow naturally, more institutions can drift into stricter regulatory buckets without necessarily becoming more risky. Proponents of raising the cutoffs say that is exactly what has happened in recent years.
Critics of deregulation counter that looser oversight of mid-size banks carries real risk. The failures of several regional banks in 2023 renewed calls for tighter, not looser, supervision of that segment of the industry. Those episodes showed how quickly depositor confidence can erode at institutions that sit below the systemically important bank tier but are still large enough to create stress across the financial system.
The Fed has not announced a formal proposal, and the details — including which thresholds would move and by how much — remain unclear. Any change would likely go through a standard rulemaking process, including a public comment period, before taking effect. We are watching for an official announcement and for reaction from bank trade groups and consumer advocates.
How far the Fed raises the thresholds, and which banks benefit, will be the key detail to watch when a formal proposal emerges.
