News Lead
The US Office of the Comptroller of the Currency (OCC) has finalised two rules designed to reduce regulatory burden for community banks, scrapping an obsolete home‑loan data rule and simplifying licensing processes, while Federal Reserve Vice Chair Michelle Bowman signals that a revised Basel III “endgame” proposal will likely mean lower capital requirements for the largest banks than originally planned.
TL;DR
- OCC removed an outdated Fair Housing Home Loan Data System rule and broadened expedited licensing for community banks to cut paperwork and costs.
- Fed Vice Chair Bowman says the Fed, OCC and FDIC have reached consensus on a softer Basel III endgame re‑proposal, expected by end‑March, which should reduce capital requirements at large banks versus the 2023 draft.
- Together, these moves show US regulators leaning further into “tailoring” — easing both community‑bank compliance burdens and big‑bank capital levels.
- In practice, that means more room for lending and distributions, but a thinner regulatory cushion if the cycle turns.
What the OCC Has Changed for Community Banks
In early March, the OCC announced two final rules as part of its effort to “tailor bank supervision and regulation to bank risk profile and reduce burden.”
The rules:
- Rescind the Fair Housing Home Loan Data System (FHHLDS) regulation, which required certain home‑loan data collection that the OCC now deems obsolete and duplicative.
- Simplify licensing requirements for corporate activities, broadening eligibility for community banks to use expedited and reduced‑filing procedures for mergers, branch openings and other corporate actions.
In simple terms, the OCC is clearing out paperwork that no longer feeds meaningful supervision, allowing community banks to devote more resources to core lending and risk management rather than legacy reporting.
Why Community‑Bank Relief Matters
For smaller banks, compliance costs are a material drag on profitability. Eliminating redundant data rules and streamlining licensing can:
- reduce legal and administrative overhead,
- speed up routine corporate actions,
- and free up management capacity for credit, technology and risk initiatives.
Regulators frame this as a way to support community banks’ role in local lending and economic growth without weakening safety and soundness, arguing that supervision will remain “risk‑focused” even as specific rules are retired.
Bowman’s Preview of a Softer Basel Endgame
On the other end of the spectrum, Fed Vice Chair for Supervision Michelle Bowman has confirmed that the Fed, OCC and FDIC have reached consensus on a Basel III endgame re‑proposal and intend to publish it by the end of March.
Bowman repeated that the new draft will:
- implement the final Basel III standards,
- recalibrate capital treatment for mortgage servicing rights (MSRs) and mortgage risk weights,
- and respond to concerns that the 2023 proposal would have constrained credit and accelerated the migration of mortgage activity outside the banking system.
A separate regulatory news briefing notes that this revised approach “signals a significant softening from the 2023 version” and is expected to result in a net decrease in capital requirements for the largest banks compared with that earlier draft.
In practice, this suggests big banks may face a lighter capital uplift — or even a modest net decrease — relative to fears stoked by the original endgame proposal.
The Common Thread: Tailoring and Burden Reduction
Looked at together, the OCC’s community‑bank relief and Bowman’s Basel remarks fit into a broader 2026 pattern:
- Regulators are pruning rules seen as outdated or duplicative (like FHHLDS) and smoothing procedural hurdles for smaller banks.
- They are also reconsidering capital calibrations that may have pushed certain activities — notably mortgages — out of the regulated banking system.
This reflects a political and policy narrative centered on “rightsizing” regulation: keeping core safeguards while reducing what is described as unnecessary burden so banks can support lending and compete with non‑banks.
For markets, however, the question is where the line lies between legitimate tailoring and a gradual erosion of the post‑crisis buffer.
What Changes for Banks in Practice
For community banks:
- Fewer legacy reporting obligations around home‑loan data should lower compliance costs.
- Expanded access to expedited licensing can shorten timelines for branch expansion, reorganizations or other corporate moves.
For large banks:
- A softer Basel endgame is likely to reduce the capital impact versus the 2023 draft, particularly around mortgages and certain risk‑weighted exposures.
- That could free balance‑sheet capacity for lending, trading and distributions, while leaving supervisors to rely more on stress‑testing and qualitative assessments to manage risk.
In simple terms, US banking policy is tilting toward more flexibility at both ends of the size spectrum, trusting supervisory judgment and market discipline to fill the gap that formal rules may leave.
What to Watch Next
Banks and investors should track several developments over the coming months:
- Basel endgame re‑proposal details: how much capital relief large banks actually get, and how it is distributed across business lines.
- Community‑bank examination practices: whether supervisory expectations change in line with reduced reporting, or remain just as demanding on governance and risk.
- Non‑bank migration: whether eased bank capital and tailored rules slow or accelerate the shift of activity into private credit and shadow banking.
For now, the direction of travel is clear: US regulators are trying to trim regulatory dead wood and ease capital pressure, betting that a more “right‑sized” framework can support growth without recreating the vulnerabilities of the pre‑2008 era.
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