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Financial institutions are entering 2026 amid a meaningful recalibration of bank supervision. For years, banks have prepared for examinations by preparing documentation, updating procedures, and validating compliance checklists. That model is now being reconsidered.
Agencies under the current administration are recalibrating bank supervision toward risk focus and outcomes over process. This is not to be mistaken for deregulation as supervisory expectations remain high. What is changing is how regulators define safety and soundness, where they spend examiner time, and how institutions can engage more constructively throughout the exam lifecycle.
Based on a recent Elliott Davis webinar, we outline how supervision is changing, where regulators are concentrating their efforts, and what banking leaders should consider in 2026.
Examiner time is increasingly directed at the financially material factors that genuinely threaten institutional safety rather than technical or documentation-driven deficiencies, affecting exam scope, cadence, and dialogue throughout the supervisory lifecycle.
In public statements made in March 2026, FDIC Chairman Travis Hill emphasized the need to focus examinations on what actually affects safety and soundness. The FDIC is executing a broad supervisory reset that addresses exams, capital, liquidity, and Bank Secrecy Act (BSA) and Anti-Money Laundering (AML) oversight, with the goal of reducing process-driven burden while preserving strong standards for safety, consumer protection, and financial stability.
For many community and mid-size institutions, this has practical implications:
Examinations are not becoming easier, but they are becoming sharper and more targeted, creating space for earlier and more meaningful supervisory dialogue and fewer surprises late in the process.
This recalibration is not limited to the agencies. Congress has shown rare bipartisan alignment around reducing unnecessary friction for banks that do not pose systemic risk.
The 21st Century ROAD to Housing Act, which passed the Senate on March 12, 2026, by an 89-10 vote, underscores this change. The legislation supports:
Together, lawmakers and regulators are moving away from one-size-fits-all oversight in favor of proportional, risk-based supervision.
Regulatory reset is not theoretical. Visible signs of cultural and operational change are underway within the agencies themselves.
Publications and speeches from Michelle Bowman, Vice Chair of the Federal Reserve, reflect a consistent emphasis on outcomes, proportionality, and innovation. Leadership and staffing changes across supervisory divisions further signal a serious effort to realign examiner priorities and internal incentives.
For institutions, this creates an important opening. Those that clearly articulate their risk profile, governance structure, and strategic objectives can increasingly able to push back constructively when examiner focus redirects toward immaterial issues, supporting fewer late-stage exam challenges.
The bank failures of 2023 fundamentally altered how regulators think about liquidity risk. The industry learned that modern bank runs do not unfold over weeks. They can happen over a weekend.
In response, regulators are reassessing capital and liquidity frameworks with an eye toward realism and responsiveness. One notable proposal would allow banks to recognize discount window borrowing capacity in liquidity calculations, better aligning regulatory metrics with how institutions actually manage stress. At the same time, capital rules for community banks are becoming more workable. The Community Bank Leverage Ratio and revised Basel III proposals are noticeably simpler than their 2023 predecessors, reducing complexity without abandoning prudential safeguards.
Despite asset quality pressures and margin strain, regulators continue to prioritize productive mortgage and consumer lending grounded in disciplined underwriting and effective risk management. Institutions with strong credit administration, effective loss mitigation, and realistic allowance methodologies are better positioned under a more risk-focused supervisory approach, reinforcing the link regulators are drawing between sound balance sheet management and real-economy lending.
BSA and AML supervision is also evolving. Rather than expanding checklist requirements, regulators are looking for risk prioritization and program effectiveness.
On April 7, 2026, FinCEN proposed a rule to modernize AML program requirements. The proposal refocuses supervision on risk-based effectiveness rather than technical compliance, giving institutions greater latitude to prioritize higher-risk activity while clarifying examiner expectations and strengthening FinCEN’s central role in AML oversight.
Examiners are paying attention to whether institutions are identifying and addressing their highest-risk activities, not whether every procedural element is documented perfectly. For banks with complex vendor ecosystems or digital channels, third-party oversight and consumer outcomes remain central areas of concern.
Regulators are drawing clearer boundaries around digital assets. Payment stablecoins will not be eligible for FDIC pass-through deposit insurance, and technology alone does not change the legal definition of a deposit. At the same time, tokenized deposits that meet the statutory definitions are being treated accordingly, signaling that innovation is welcome, but legal substance matters more than technical form.
Regulators are also rethinking how failed banks are resolved, including the role of non-bank buyers. Concepts such as emergency self-chartering are being explored to accelerate resolution timelines and reduce costs to the Deposit Insurance Fund.
This federal oversight reset is best understood as a refocusing, not deregulation. Supervisory expectations remain rigorous. What has changed is the lens through which regulators assess safety and soundness.
Banks that align early with this reset by clearly linking governance, risk management, and strategy to real-world outcomes will be best positioned. Those that continue to manage primarily to documentation risk may find themselves out of step with where supervision is heading.
Contact a member of our Financial Services Group to discuss how this supervisory reset may affect your institution and how to position governance, risk management, and strategy for success.
The information provided in this communication is of a general nature and should not be considered professional advice. You should not act upon the information provided without obtaining specific professional advice. The information above is subject to change.
