BPInsights: November 22, 2025

Miran: 'Regulatory Dominance' Drives Fed Balance Sheet

Federal Reserve Governor Stephen Miran discussed the intersection of bank regulation and the Fed's balance sheet at a BPI/Small Business and Entrepreneurship Council event on Wednesday. Here are some highlights.

• Monetary Policy Hinges on 'Regulatory Dominance'. The Fed's large balance sheet depends on bank regulation, Miran said, emphasizing the often-overlooked link between bank regulatory effects on demand for reserve balances (banks' deposits at Reserve Banks) and the implementation of monetary policy. The Fed's adjustment of the regulatory framework may enable it to shrink the balance sheet, he suggested in a speech. "As we right-size the regulations, my hope is that it will allow us to further reduce the size of the balance sheet, relaxing the grip of regulatory dominance."
• Recommendation: Exempt Treasuries from the Leverage Ratio. Miran suggested that removing Treasuries from banks' leverage ratios "would help insulate the Treasury market from stressful episodes when liquidity is in short supply," framing it as a proactive remedy to Treasury market dysfunction. "Instead of being forced to react to Treasury market dysfunction after it has occurred, I think excluding those assets now is a small price to pay to deter that potential dysfunction." He referred to historical examples, such as the pandemic-era temporary exclusion of Treasuries and reserves from the supplementary leverage ratio.
• The Influence of Supervision. Miran noted in his speech that supervision policy can drive banks' demand for reserves beyond what is required, citing comments by former Vice Chair for Supervision Randy Quarles. He expressed support for the supervisory reform principles released by the Fed this week, noting his support for Vice Chair Bowman's leadership.
• Interest on Reserves. The Fed's payment of interest on reserve balances, a target of recent political scrutiny, is another area where regulation plays a significant role, Miran said. Miran raised the question of whether the Fed should pay interest on the Treasury General Account. He also asked: "[R]ather than keep our liabilities to Treasury as zero-yielding deposits directly, would it make more sense for the Fed to hold short-term assets such as Treasury bills or repos against the TGA?"
• Liquidity Reform. BPI CEO Greg Baer observed the recent "sea change" in how regulators define bank liquidity: previously, the mark of good liquidity was access to varied sources of funding including the discount window, while now it is a trove of high-quality liquid assets. He asked where the Fed is on liquidity reforms. "One thing that I wanted to get across today was the relationship between, as we've been discussing, the relationship between these regulations and what it means for the amount of reserves the system requires," Miran said in response. "It is the case that the liquidity regulations are the nexus for that … I do think it is also appropriate to sort of rethink that over time." He noted that the process will require some time and coordination with the other prudential regulators.

Things to Watch Next Week

• The FDIC will hold an open board meeting on Tuesday, Nov. 25, to vote on changes to the enhanced supplementary leverage ratio and proposed changes to the community bank leverage ratio.

Five Key Things

1. Sharper Focus on Real Risks: Fed Unveils Supervision Principles

The Fed on Tuesday released supervisory operating principles that underpin its changing approach to bank supervision under Vice Chair for Supervision Michelle Bowman. The release came in the form of a memo sent to Fed staff on Oct. 29. The memo indicates these principles may be formalized through guidance or rulemaking. BPI expressed support for the principles in a statement. Here are the highlights.

• Material Risks. At the top of the memo was a driving thesis encapsulating Bowman's approach: "Examiners and other supervisory staff should prioritize their attention on a firm's material financial risks." The memo also stated that examiners "should not become distracted from this priority by devoting excessive attention to processes, procedures, and documentation that do not pose a material risk to a firm's safety and soundness." The Fed plans to amend its policies to enable examiners to address bank shortcomings that fall short of an MRA or MRIA by making "nonbinding supervisory observations." Bank ratings should also reflect a firm's financial condition and material risks, the memo said.
• Reducing Duplication. When evaluating bank holding companies, bank examiners must rely as much as possible on the oversight conducted by the primary state or federal regulator for that bank's depository institution subsidiaries, according to federal law. Therefore, "Federal Reserve supervisory staff should not conduct their own examination of such depository institution subsidiaries unless it is impossible for the Federal Reserve to rely on the examination of such a depository institution's primary state or federal supervisor," the memo said, noting that such Fed-specific examinations are not justified "simply because we might do examinations differently."
• MRAs. The principles recommend several changes related to Matters Requiring Attention and Matters Requiring Immediate Attention. Examiners "need to change the way they decide whether an MRA, MRIA or requirement in an enforcement action can be terminated because the underlying deficiency has been fully remediated"; MRAs and MRIAs should not be communicated in vague or overly broad language; and they should prioritize deficiencies that could have a material impact on the bank's financial condition. The memo referred to ongoing work to change the Fed's interpretation of the legal standard for issuing enforcement actions based on unsafe or unsound practices.
• Horizontal Reviews. The memo raises the bar for performing "horizontal reviews," or assessments of banks across a peer group of institutions, and provides for more transparency in conducting these reviews.

2. NGFS Flags Problematic Climate Damage Function

The Network for the Greening of the Financial System has now added a prominent notice to its most recent publications cautioning that the climate damage function in its long-term climate scenarios has received academic criticism. The NGFS included the notice in its updated guide for central banks and supervisors, and in their new explanatory papers on key findings and on underlying climate scenario assumptions. Notably, the recent NGFS document "NGFS Declaration on the Economic Cost of Climate Inaction" did not mention the climate damage function. These are encouraging steps given the flawed nature of the function and the implications for its use in regulators' oversight of bank risk management practices.

• Background. The damage function, based on the Nature paper "The Economic Commitment of Climate Change" and introduced by the NGFS in November 2024, predicted very significant economic losses from climate change. In early December 2024, a BPI note raised serious statistical issues with the Nature paper. BPI published subsequent notes in August and September 2025. In August 2025, Nature acknowledged the problems with the climate damage function paper by publishing two academic critiques on the paper's website.

3. FT Column: We Have to Be Able to Hold Tech Platforms Accountable for Fraud

A column this week by the Financial Times' Martin Wolf emphasized the necessity of holding social media and tech platforms accountable for the fraud that proliferates in their ecosystems. Wolf would know: He was a victim of a "deepfake" scam that circulated Instagram ads featuring his likeness and offering investment advice. His experience in pressing Meta (which operates Instagram) to take down the fraudulent ads led him to the conclusion that "Meta can stop them if it is determined to do so." Wolf cited the recent Reuters investigative story that revealed the breadth, and profitability, of fraud and scams on Meta's platforms. "This is a system designed to increase the profitability of posting ads deemed highly likely to be fraudulent," Wolf said. "Worst of all, Meta's algorithms ensure that people who click on scams are likely to see more of them." In addition to the victims duped by scams, the scams are often perpetrated by victims themselves - trafficked individuals in southeast Asian scam farms, Wolf noted. "Meta and other similar platforms are accessories to fraud," he wrote. "The costs of this are not only to the fooled and the coerced. They include damage to trust." His conclusion: "The remedy is obvious. People should be allowed to sue the platforms for full reimbursement of costs they incur from being tricked by the fraudulent advertisements they publish. Once this is allowed, these advertisements will surely disappear. Fraud is a crime. Profiting from fraud must be stopped."

4. Not All Charters Are Created Equal

Bank charters are in vogue. As more companies pursue banking charters, it is important to understand that a bank charter is not one-size-fits-all. Full-service, trust company, industrial loan company charters and other potential pathways differ in many ways, and not all charters permit the same activities or feature the same oversight and consumer protections, such as FDIC insurance, that one might expect. Therefore, it's important to understand the difference.

Our latest explainer breaks down the many distinctions.

5. Federal Reserve Proposes 2026 Stress Test Scenarios

The Federal Reserve on Oct. 24, 2025 proposed scenarios for the 2026 stress test. A recent BPI blog post examines the scenarios.

What's New. For the first time, the Fed is seeking public comment on the scenarios. The comments are due by Dec. 1, 2025 and the scenarios will be finalized by Feb. 15, 2026.

• The Fed also proposed for comment a Scenario Design Policy Statement that provides more detail on how it calibrates scenario variables using proposed variable "guides" and a macroeconomic model. Comments on the 2026 scenario are due Dec. 1, but comments on scenario design and inputs can be submitted by the current Jan. 22 deadline for comment on the broader proposal.
• These actions are part of the Fed's efforts to enhance the transparency and accountability of the stress tests to come into compliance with requirements of administrative law.

High-Level Themes. The prominent themes of the proposed scenarios for next year are:

• A sharp decline in commercial real estate prices.
• Investor aversion to long-term assets.
• Steep increase in the BBB spread.
• Higher-for-longer path for equity market volatility.

Why It Matters. Each bank's performance under the severely adverse scenario will become part of their annual stress capital buffer, which is a key component of their binding capital requirement. BPI has long held that the annual scenarios are legislative rules that are subject to notice and comment rulemaking requirements under the Administrative Procedure Act.

Bottom Line. The Federal Reserve's proposed 2026 severely adverse scenario is broadly consistent with prior stress tests. The scenario features a noteworthy decline in CRE prices, a significant widening of credit spreads, a higher-for-longer equity market volatility path and a steep yield curve.

In Case You Missed It

Senate Banking Committee Advances Hill FDIC Nomination

The Senate Banking Committee on Wednesday advanced the nomination of Travis Hill to lead the FDIC. Hill currently serves as the acting chair of the agency. The vote was 13-11 along party lines.

President Taps New CFPB Nominee

President Trump this week nominated Stuart Levenbach, a senior Office of Management and Budget official overseeing natural resources and energy issues, to lead the Consumer Financial Protection Bureau. The action was a technical maneuver to extend the time that Acting Director Russell Vought can serve as temporary head of the agency under a statute that limits the term of acting agency chiefs, according to a CFPB spokesperson. Vought's ability to lead the CFPB on an acting basis would otherwise expire in December. The administration is still planning to shut down the agency.

• Legal Matters to DOJ. The CFPB is preparing to transfer its remaining enforcement actions and other litigation to the Justice Department as the bureau prepares to wind down its operations, according to POLITICO this week.

Bloomberg Editorial Endorses Long-Term Extension of Cyber Info-Sharing Law

A recent Bloomberg editorial called for U.S. policymakers to stop "unilaterally disarming" cyber defenses amid rising security threats. The editorial urged Congress to restore funding and staffing for the Cybersecurity and Infrastructure Security Agency, which has lost nearly a third of its staff since January. It also called for lawmakers to permanently reauthorize the Cybersecurity Information Sharing Act of 2015, which was temporarily reactivated when the government shutdown ended, but only through January. "The information-sharing law … has widespread support across both sides of the aisle and across industry," the editorial said. "It should be extended beyond January, and a replacement found for the public-private council that formerly allowed industry to discuss sensitive security information with the government."

• View from the Hill. Rep. Jim Himes (D-CT), ranking member of the House Permanent Select Committee on Intelligence, expressed disappointment at an event this week on cybersecurity that the sharing law had not been permanently reauthorized. "We need to dedicate ourselves to making sure that CISA and CISA 2.0 and 3.0 and 4.0 are not held up by legislative boutique concerns," he said.
• Muscle Memory. Threat information sharing builds a crucial connection between government and industry that is "strengthened with practice," Himes said. "It takes a while to build … the muscle memory," he said

Lawmakers, Bankers Convene on Cyber Crime, Fraud

At a POLITICO-Capital One event this week, banking industry representatives and lawmakers discussed the urgent need to address financial fraud, cybersecurity vulnerabilities and illicit financing. Here are a few highlights. (Rep. Jim Himes' comments on CISA reauthorization at this event are mentioned elsewhere in this newsletter.)

• Lay of the Land. Nils Mueller of the Global Anti-Scam Alliance gave an overview of popular scams, including shopping scams and crypto romance scams, and noted the explosion of "scam compounds" in Southeast Asia forcing trafficked people to conduct scams. "It's a massive problem at a societal level … that's what we're dedicated to trying to resolve," he said. On the same panel, FBI Special Agent Jordan Jenkins said actions by federal law enforcement are not sufficient to resolve the scam problem. "There is a misconception that we're going to be able to arrest and prosecute our way out of this problem," Jenkins said. "We do a very good job at it, and I love to do it. It's just the scope of this problem is so large that we're not going to be able to do that singlehandedly." A full solution requires consumer education and public-private sector collaboration.
• 'Team Sport.' Chris Sparks, head of card fraud at Capital One, called for a full team effort among telecom, social media, banks and law enforcement to tackle fraud. Banks are like the goalie: "We're the last line. We have to block the shots," he said. "But ultimately we need the rest of the team, which are the telecoms, social media and law enforcement, to make it so there are less shots against us, against our customers, because we can't block everything. It really is a team sport."
• Financial Crimes Task Force. Rep. Himes mentioned his legislation co-sponsored by Rep. Zach Nunn (R-IA) that would create a multi-agency federal task force to address financial crimes. He gave the example of spoofed scam calls from Southeast Asia affecting U.S. senior citizens as a problem that requires a unified interagency response. "You cannot get your arm around that unless you've got probably FTC, maybe FCC, the financial regulators and probably the State Department," Himes said. "So it's really essential that this is a multi-agency thing."
• Privacy Legislation. Himes expressed concern about lawmakers' "original sin," in his view - failure to update data privacy laws. "Unless you have a sort of a rubric of who owns your data and who controls it, and how do you permission its use, you're trying to build a car without wheels," he said. "I'm a little adamant on that topic, because that would be the basis … for preventing a lot of scams, protecting people's privacy, and probably would help us regulate AI." He pointed to California's CCPA and Europe's GDPR as examples of significant privacy frameworks enacted in recent years. "It should be explained to you what your choices are and how you make that data available, and then you should actually permission people in to using your data," he said. "And if Facebook wants to say, look, you can let me use your data, or you can pay me $12 a month? Fine. That's a good free market solution, but it's rooted in the notion that you control your own data."
• Local and International. Himes cited a recent media story on Bitcoin ATM scams that highlighted the need for federal policymakers to collaborate closely with local police to stop crypto fraud. In addition, the U.S. should have "a lot more tools to go after the criminals abroad," he said, noting that many scams originate overseas. He also called for more anti-scam consumer education.
• Scam Reimbursement. When asked if he would support a federal reimbursement standard for scams, as some consumer groups have advocated, Himes responded: "I'd be skeptical of saying there should be a reimbursement fund, which would probably end up subsidizing this activity."

BPI's Scott Frame Discusses Private Credit, Fragmentation in Cleveland Fed Panel

BPI Deputy Head of Research Scott Frame chaired a panel on financial institutions on Thursday at the Cleveland Fed's annual Financial Stability Conference. The panelists were Mark Flannery of the University of Florida, Marc Saidenberg of Ernst & Young and Daniel Tarullo of Harvard. Panelists highlighted the risks from private credit and stablecoins and judged that it was important that the regulatory regime for nonbank financial intermediaries kept pace with their importance for credit creation. They also identified international regulatory fragmentation and trapped liquidity and capital as potentially reducing the financial resilience of large internationally active banks in the event of stress.

The Crypto Ledger

Here's the latest in crypto.

• OCC Confirms Banks Can Pay 'Gas Fees' on Blockchains. The OCC this week clarified in an interpretive letter that national banks may pay network fees, sometimes called "gas fees," on blockchain networks to facilitate "otherwise permissible activities." They may hold, as principal, crypto assets on balance sheets that are necessary to pay these fees "for which the bank anticipates a reasonably foreseeable need." The OCC also confirmed that national banks may hold crypto assets as principal that are necessary for testing otherwise permissible crypto-related platforms. BPI requested the banking agencies provide this clarity in its second letter to the President's Working Group on Digital Asset Markets.
• Scott Aims for December Crypto Markup. Senate Banking Committee Chair Tim Scott (R-SC) said in a media interview this week that he is aiming to mark up crypto market structure legislation next month in both his committee and the Agriculture Committee. "Next month, we believe we can mark up in both" the panels, Scott said on Fox Business News' "Mornings with Maria."
• Bitcoin ATM Scams. A key vector for crypto scams across the U.S. is bitcoin ATMs. The New York Times reported this week on how these ATMs are fueling massive fraud throughout the country, including against senior citizens duped by romance scams. The Times also published a piece this week highlighting the $28 billion in illicit

Traversing the Pond

Here's the latest in international banking policy.

• ECB Stress Test Results. This week, the ECB published the results of its 2025 Supervisory Review and Evaluation Process for the banks that it oversees. The results "show robust capital and liquidity positions and strong profitability," according to the central bank. Overall CET1 capital requirements and guidance remained "broadly stable" at 11.2 percent for 2026, a modest decrease from the prior year. The ECB noted that supervisory priorities for the next two years focus on resilience to geopolitical risks and macrofinancial uncertainties, operational resilience and IT capabilities.
• Buch Considers Releasing Trapped Capital. ECB supervisory chief Claudia Buch said in a Financial Times interview this week that considering waivers to enable trapped capital to cross national borders "could be a useful step for policymakers." European banks often face barriers to deploy money across international borders, exacerbating financial system fragmentation. Buch suggested waivers to free up more capital could align with the EU push to strengthen integration of financial markets.
• Basel Chief Calls for Revamp of Crypto Capital Rules. Erik Thedéen, head of the Basel Committee on Banking Supervision, called this week to rework rules requiring banks to hold very large amounts of capital for crypto asset holdings. The rules have faced pushback in the U.S. and UK. "This very strong increase in stablecoins and how much assets are in that system calls for a different approach," Thedéen said. An industry joint trade letter in August cautioned that these requirements make it uneconomical for banks to meaningfully participate in such markets. Later this week, the Basel Committee on Banking Supervision released a readout of its meeting, during which the Committee "agreed to expedite a review of targeted elements of the standard" for capital requirements on bank crypto asset exposures.
• FSB Plenary Approves 2026 Work Plan. The Financial Stability Board Plenary this week approved the organization's work program for 2026, including key deliverables for the U.S. G20 presidency. At a meeting this week, FSB participants discussed global financial system vulnerabilities, implementation of international standards and challenges for emerging market economies. The group is also focused on aligning global regulatory frameworks on crypto and stablecoins; seeking solutions to cross-border payment challenges; and other issues including nonbank financial intermediaries and resolution.
• Macroprudential Bulletin. The ECB recently published its latest Macroprudential Bulletin, featuring articles on the countercyclical capital buffer, the 2025 EU stress test and climate risks.

JPMorganChase Announces Largest Financial Fraud and Scam Prevention Effort in Firm's History

JPMorgan Chase this week unveiled the largest fraud and scam prevention initiative in the bank's history, which includes consumer education, prevention, awareness and continuing investments in operational enhancements designed to reduce fraud attacks. The announcement coincided with International Fraud Awareness Week, during which Chase hosted educational workshops across the country in coordination with law enforcement to educate the public on recognizing scams.