BPInsights: October 3, 2026

Fed Issues Final Stress Test Rules, Boosting Transparency

The Federal Reserve on Wednesday issued final rules codifying its changes to the stress testing framework, which will bring transparency and public accountability to the process. The Fed also re-proposed the pre-provision net revenue models, a particular weak point of the prior framework, in response to public comment.

• BPI, ABA Response. BPI and the American Bankers Association issued a statement in response to the rules. "Transparency and public input have produced a better stress testing framework that should improve accuracy and allow more thoughtful capital planning at covered banks, with economic benefits to the country," the groups said. "The Fed's decision to re-propose certain pre-provision net revenue models is an example of how opening the process to public comment - as required by the Administrative Procedure Act - is driving better policy. We appreciate that the Fed is taking the time and using an appropriate process to fix flaws in those models identified in the recent comment process."
• The Role and Benefits of Stress Tests. BPI published a post on Wednesday outlining the benefits of well-designed stress tests, their role in the banking system and why they matter for the economy. Read it here.

Five Key Things

1. FTC Leaders Call on Big Tech to Stop Scams

Big Tech companies must be held accountable for impersonation scams that spread on their platforms, Federal Trade Commission Chairman Andrew Ferguson and Christopher Mufarrige, head of the FTC's Bureau of Consumer Protection, wrote in a Bloomberg Law op-ed this week. The officials highlighted the distorted incentives in the social media ecosystem, in which platforms profit from scams. "When consumers fall victim to impersonation scams, they typically look to the impersonated entity (e.g., a business or government agency) for recourse, rather than the platform that delivered the advertisement," Ferguson and Mufarrige wrote. "As a result, the technology platforms that promoted, amplified, and optimized the fraudulent ads reap substantial advertising profits but bear virtually none of the financial consequences. The platforms pocket the profits, American consumers bear the costs." The op-ed noted that platforms have the tools to stem the tide of scams, but are not doing enough to confront the problem. "And because consumers tend to blame the impersonated firm or their bank rather than the platform for the fraud, the platforms have little incentive - financial or otherwise - to change course," the authors wrote.

• ANPR. The op-ed follows an advance notice of proposed rulemaking that the FTC published last week that considers making social media platforms, digital marketplaces and search engines accountable for enabling and amplifying impersonation fraud. "As part of this process, the FTC is seeking public comments on the types of requirements that the rule should contain to ensure that companies are incentivized to prevent fraudulent activity on their platforms, rather than profiting from it," the officials wrote. The ANPR highlights the scope and severity of impersonation scams on Americans, explaining that such scams are particularly pernicious because they exploit customers' confidence in trusted institutions. The measure cites the FTC's legal authority to address the problem under Section 5 of the FTC Act, and contends that Section 230 of the Communications Decency Act - which shields platforms from liability for content posted by third parties - does not prevent the FTC from taking these steps.
• Consumer Groups Press for Action. Consumer advocacy groups urged lawmakers this week to hold tech companies accountable for scams occurring on their platforms. More than 30 organizations including the Consumer Federation of America called for investigations of how tech companies' business models facilitate fraud. They also urged Congress to pass legislation to prevent scammers from reaching users.
• Stop SIM Box Scams. BPI issued a statement this week in support of the Stop SIM Box Scams Act, introduced by Rep. Jefferson Shreve, that would crack down on SIM boxes, key vectors for scams that exploit the telecom networks.

2. Counting on the Discount Window

Two new notes by BPI Chief Economist Bill Nelson take up the questions regulators will need to answer as they revise bank liquidity rules and the Federal Reserve moves toward a smaller balance sheet: should banks' capacity to borrow from the discount window count toward liquidity requirements, and if so, what collateral should be allowed to back those loans? The notes conclude that capacity should count, and that the rules should allow banks to pledge the loans they make to Main Street, not only loans they make to the federal government in the form of Treasury securities.

• Key Context. Treasury Secretary Bessent has called for liquidity rules to recognize borrowing capacity against collateral prepositioned at the discount window, and Fed Chairman Warsh has said the Fed's balance sheet can be reduced significantly. A smaller Fed means fewer reserve balances, and something must take their place as banks' source of immediate, same-day liquidity.
• Certainty. The first note, "Banks Can Count on the Discount Window…if Regulators Will Let Them," examines the most common objection to recognition: that access to the window is not completely certain. It finds that no source of funds the liquidity coverage ratio already counts is completely certain either, including cash inflows, monetized securities, reserve balances and central bank committed facilities, and that applying a "complete certainty" standard to discount window capacity alone is continuing the examiner bias against the discount window that has crippled it as a monetary policy and financial stability tool.
• Collateral. The second note, "Replacing Reserve Balances: Loans, Not Treasuries, Should Back Banks' Discount Window Capacity," points out that the usual choice, discount window borrowing versus holding Treasuries, is a false one. Under the Fed's own guidance, banks turn Treasuries into same-day cash by borrowing against them at the discount window. Both options are discount window loans; the only difference is the collateral. The note explains that rules recognizing loan collateral would support lending and growth, add liquidity to the financial system, reduce discount window stigma and pose no added risk to the Fed, which has not lost money on a discount window loan in 100 years.

3. Bowman: eSLR Reform Shows 'Encouraging' Treasury Market Impact

Recalibration of the enhanced supplementary leverage ratio has improved Treasury market functioning and strengthened the market's resilience to stress, Federal Reserve Vice Chair for Supervision Michelle Bowman said in a speech Thursday. The Fed revised the ratio last year to restore it to its intended purpose as a backstop, rather than a binding constraint on banks' balance sheets. When the eSLR is binding, it constrains banks' Treasury market making capacity, impairing the liquidity and depth of the market. The new rule is unlocking that capacity, Bowman said. "The impact of this recalibration has been encouraging," she said. "So far this year, evidence shows that leverage ratio reforms have improved Treasury market functioning and strengthened its resilience to stress by relaxing regulatory balance sheet constraints."

• By the Numbers. Bowman pointed to supervisory data to illustrate the effect of the rule changes on banks' Treasury dealing. Banks' total Treasury positions increased from about $600 billion at the beginning of the relevant period to over $700 billion at the end of April. "This increase was concentrated among the firms that had consistently maintained the lowest eSLR buffers over the previous 24 months and were thus more constrained by the eSLR," Bowman said. "This pattern suggests that the sharp increase in positions was driven by dealers taking advantage of additional headroom created by the eSLR modification."
• Deeper Dive. Bowman previewed forthcoming research by Federal Reserve Board staff examining how the new eSLR rule affected banks' Treasury market activity.

4. Tether is Iran's 'Lifeline,' Senate Report Says

A Senate staff report this week concluded that Tether serves as a "significant financial lifeline" for Iran, which relies on the coin to circumvent international sanctions. The report, led by Sen. Richard Blumenthal (D-CT), ranking member of the Senate's Permanent Subcommittee on Investigations, examined public transaction data from 846 crypto wallets that were blacklisted for links to Iran. Of those wallets, 84 percent transacted exclusively or almost exclusively in Tether's USDT token.

5. ICBA Sues OCC Over National Trust Bank Charters for Crypto Firms

The Independent Community Bankers of America filed a lawsuit on Friday against the Office of the Comptroller of the Currency for exceeding its authority under the National Bank Act by authorizing novel entities to enter the banking system without being subject to the same rigorous regulatory framework or safeguards as community banks.

ICBA CEO Rebeca Romero Rainey said that "The OCC's decision to allow companies to obtain national trust bank charters to conduct substantial non-fiduciary activities exceeds the authority Congress granted the agency," and that, "Congress did not create the national trust charter as a side door into the banking system for crypto firms seeking the credibility of a federal bank charter without the Community Reinvestment Act obligations, consolidated supervision, capital and liquidity standards, and FDIC insurance that apply to insured depository institutions."

• The lawsuit centers on the final rule related to Interpretive Letter No. 1176 and asks the federal court to find both the final rule and the letter unlawful, alleging that the rule and its related guidance attempt to provide the OCC with sweeping new powers to charter national trust banks that are not authorized by the National Bank Act.
• BPI also issued a statement restating concerns with national trust charters being used for operations beyond genuine trust activities: "As we've said in comments filed on numerous national trust bank charter applications, BPI supports efforts to bring innovative new products and services into the regulated banking ecosystem, provided that the entities engaging in those activities are subject to the same rules and responsibilities as every other chartered institution engaging in the same activities. Companies should not receive trust charters unless they plan to limit their operations to genuine trust activities. If they want to engage in traditional banking activities, they should seek full-service banking charters. Rigorous, uniform standards are essential to fostering a competitive, safe and resilient banking system."

In Case You Missed It

Rising Floors, Disfavored Loans: Basel Capital Requirements Drive Bank Lending Decisions

The 2017 Basel III reforms introduced an "output floor" limiting how far capital requirements calculated using internal models can fall below those based on standardized approaches. A new blog post this week from Bank of England staff suggests that implementing this policy will not just raise capital requirements but may also distort lending allocation. "We find that [the output floor] may tilt lending towards corporate loans and some riskier mortgages, and away from the safest mortgages." (The U.S. Basel III proposal drops internal models-based approaches, which previously were effectively subject to a 100 percent output floor owing to the Collins Amendment.) The post also suggests that banks may adjust their portfolios before implementation of the revised framework.

BPI's predecessor organization, The Clearing House, made a similar point in 2017, observing that U.S. stress tests may favor and disfavor certain types of lending. The stress tests impose "dramatically higher capital requirements on certain asset classes - most notably, small business loans and residential mortgages - than Basel standardized models and banks' internal models that are approved by the Federal Reserve," TCH noted in a press release accompanying the publication.

While focused on different regulatory tools, both analyses highlight the same broader issue: capital regulation may influence the allocation of credit in the economy, not only how much capital banks must hold.

The Ledger

Here's the latest in crypto.

• Cleveland Fed Survey Casts Doubt on Stablecoin Uptake. U.S. businesses show little interest in adopting stablecoins, despite a more clearly defined regulatory framework under the GENIUS Act, a Federal Reserve Bank of Cleveland survey found. The survey asked 148 firms whether they currently use stablecoins, with only one responding affirmatively. "Among those who said they are not currently using stablecoins, only seven said that they plan to use them in the future, while the remaining 140 had no plans, had never heard of stablecoins, or said they didn't know," the researchers said. Firms cited a lack of understanding of stablecoins, insufficient client demand, doubts about the value of adoption and concerns about risks and regulatory treatment. "While our survey size is small and geographically concentrated, our findings are backed up by public statements and regulatory disclosures, in which our searches yielded little evidence that nonfinancial, noncrypto firms were holding substantive amounts of stablecoins on their balance sheets." The researchers cautioned that stablecoins are "still a relatively new and untested technology, so corporate adoption could rise in the future if firms see a benefit from using them and feel comfortable with the risks involved," noting that there were some areas of interest among respondents, such as using stablecoins to make and receive payments.
• Unlicensed. European Union officials are probing whether Binance continued to operate in the EU after it failed to acquire a license this year. Binance failed to secure a European crypto license in Greece, but has continued to onboard European customers under a "reverse solicitation" provision that allows clients to independently seek out overseas financial providers, Bloomberg reported.
• Treasury Rolls Out State Stablecoin Licensing Framework Procedures. The Treasury Department released forms and procedures for reviewing and approving state-level stablecoin licensing frameworks this week. Treasury issued an interim final rule allowing states some flexibility in meeting a deadline to submit their regimes for stablecoin issuers. States must certify to a committee of federal regulators that their oversight regimes are on par with the framework established at the federal level by the GENIUS Act.
• Pokémon and Crypto Hacks. Maryland cybersecurity consultant Jonathan Spalletta was on trial this week in New York for allegedly stealing nearly $55 million in hacked cryptocurrency. Prosecutors allege that Spalletta spent some of the money on rare Pokémon and Magic: The Gathering cards. Spalletta faces a maximum sentence of 20 years in prison if convicted.

Fed IG Report: No Criminal Violations in Renovation Work

The Federal Reserve's inspector general report released this week found no evidence of criminal violations related to the headquarters renovation. However, President Trump said after the release that former Chair Jerome Powell, now a governor, should be "forced to resign" from the central bank's board "at a minimum." The report said that management and oversight failures contributed to significant cost overruns in the renovation but found no grounds for a criminal referral. For example, the report found that the Fed failed to negotiate a guaranteed maximum price of the renovations in advance; other factors in cost overruns included limited subcontractor bidding and inflation, according to the report. The investigation emerged amid administration scrutiny of the renovation project, with the Justice Department issuing subpoenas to the Fed earlier this year. DOJ dropped its criminal probe of then-Chair Powell in April and said the case could only resurface with a criminal referral from the Fed's inspector general; this IG report closes the loop on that possibility.

JPMorgan Chase Customers Get New Tool to Manage Fintech Data Sharing

JPMorgan Chase is changing its interface to give customers more prominent notices of which fintechs, apps and other third parties are accessing their account data. "Customers should be in control of their financial data, and that starts with giving them a clear view of where it's going and straightforward tools to manage it," Melissa Feldsher, JPMorgan's head of payments, trust and security and open banking, said in a recent statement. The disclosures, which tell customers how long the third-party data connections last and offer the option to end a connection, will be available on the homepage of the Chase banking app. In a quote to Bloomberg, the Financial Technology Association argued that banks shouldn't provide consumers with these types of tools that show how data is being shared and give them control over who can access their data, saying that this transparency is "Nudging consumers to cut off connections" and is "additional friction." JPMorgan's additional transparency comes as policymakers are about to consider potential revisions of CFPB's Section 1033 of the Dodd-Frank Act, which governs data sharing. A proposal was sent to the White House Office of Information and Regulatory Affairs.

FDIC, Fed Publish Living Will Feedback

The Federal Deposit Insurance Corporation and Federal Reserve this week published feedback letters for large banks' resolution plans, known as living wills. The plans were submitted in October 2025. The agencies "did not identify any shortcomings or deficiencies in these resolution plan submissions," according to a release. The plans were submitted by 15 banks with over $250 billion in assets.

• Dissenting Vote. OCC Comptroller Jonathan Gould voted against a joint resolution plan letter from the FDIC and Fed to American Express, expressing concerns about opacity and uncertainty in the resolution planning process. In a statement, he said that while the feedback "may appear to be relatively benign, it is continued evidence that the 165(d) resolution planning process remains as unclear and unfair as it was when it began in the early 2010s." He suggested there should be more of an onus on the agencies to be capable of resolving failing banks, rather than "forcing banks to structure themselves to fail." "We have gone too far in forcing banks to structure themselves to fail in an effort to excuse our own inability to resolve them; banks should be built to serve the lending and other financial needs of their communities and customers. Even raising the specter of large-scale restructuring based on this high-level, non-'shortcoming'/non-deficiency feedback is unacceptable."

Traversing the Pond

Here's the latest in international banking policy.

• BoE Releases. The Bank of England published two reports this week: the record of the Sept. 25 Financial Policy Committee meeting, and the results of a Systemic Risk Survey. The FPC record noted increasing concerns about interaction of geopolitical shocks, sovereign debt vulnerabilities, AI-related risks and leverage in market-based finance. Still, the Committee views the banking system as resilient and capital requirement increases unnecessary. A key theme of the report was the intensified scrutiny on AI as a financial stability risk, with the technology shifting from an operational issue to a macroprudential issue. The FPC will proceed with its planned leverage ratio reforms and consultation expected in early 2027. The Systemic Risk Survey showed that geopolitics and cyber risk are top of mind for market participants, and AI is the fastest-rising risk category and was the third-most cited source of systemic risk.
• Bailey on AI Governance. In a speech this week, Bank of England Governor Andrew Bailey discussed the need for testing and sound governance of artificial intelligence. "One should not see testing as an alternative to future regulation, nor as a complete solution," Bailey said. "Over time, a more formal regulatory framework may well emerge. But regulation is not, in my view, the right place to start. Understanding, testing and establishing credible points of intervention must come first." Bailey focused on frontier AI, which "has important implications for financial stability," increasing the scale and sophistication of cyber threats to the financial system. "We can no longer consider the resilience of payments networks, financial market infrastructures, banks and other critical institutions separately from AI advances."
• BCBS Meeting. The Basel Committee on Banking Supervision met this week in Indonesia, discussing views on artificial intelligence in the banking system as well as other topics. The panel approved the annual assessment exercise for GSIBs and revisions to reduce year-end window dressing. The Committee also agreed to consult on additional Pillar 2 guidance on interest rate risk in the banking book and to provide updates on its targeted review of the prudential standard for banks' exposures to crypto assets by the end of the year.
• Dejmek Hack Appointed to Senior EC Position. The European Commission this week appointed Paulina Dejmek Hack as Director-General within the Directorate-General for Financial Stability, Financial Services and Capital Markets Union. The position took effect on Oct. 1. Dejmek Hack is currently Deputy Director-General in the department.

Member News

Jamie Dimon: A Plan for the Western World's Revival

In a Wall Street Journal op-ed this week, JPMorgan Chase CEO Jamie Dimon called for reinforcing America's strength through "the values and principles, including free enterprise, that made this nation great." "A renewed commitment to American values and alliances coupled with bold reforms by Europe would be a geopolitical and economic home run, guaranteeing the Western world's strength for the next 250 years," Dimon wrote. Read more here.

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Upcoming Events

• 10/13/2026-10/16/2026: DC Fintech Week
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