Updates on the US FDIC Reform Agenda

In remarks delivered at the American Bankers Association last week, Travis Hill, Chair of the US Federal Deposit Insurance Corporation (FDIC), outlined a sweeping reform agenda across supervision, capital standards, liquidity, anti-money laundering (AML), stablecoins, and bank resolution.

Hill signalled a decisive shift in supervisory philosophy, away from process-driven examinations toward a focus on material financial risks and actual noncompliance with laws and regulations. Reforms to the CAMELS rating system are forthcoming, alongside a significant overhaul of consumer compliance examinations. Two capital proposals are also imminent. One would implement the 2017 Basel agreement with modifications tailored to the U.S. economy. The other would address risk sensitivity for all banks, with the intended effect of expanding lending and levelling the playing field between large and small institutions.

Turning to liquidity, Hill proposed allowing banks to count Federal Reserve borrowing capacity toward their Liquidity Coverage Ratio, a change he argued would better reflect the realities of acute stress events. On AML, he called for a smarter, risk-focused regime and encouraged banks to adopt AI tools without fear of supervisory penalty.

On stablecoins, the FDIC plans to propose that payment stablecoins are not eligible for FDIC pass-through insurance, a question Hill argued should be answered “definitively by regulation, rather than waiting until a bank that holds stablecoin reserves fails.” Finally, Hill announced plans to rescind the FDIC’s 2009 restrictions on private investor participation in failed bank purchases and to explore an emergency shelf charter exception that would allow nonbanks to bid rapidly on failed institutions, with the goal of reducing costs to the Deposit Insurance Fund.