BPI’s Most Read Posts of 2025

As we begin a new year, we just want to say thank you. We're incredibly grateful to everyone who read, shared and engaged with BPInsights throughout the year.

To celebrate, we're kicking things off with a look back at the 10 most read BPI posts of 2025 - the stories, insights and ideas that resonated most with you.

Happy holidays!

1) The Most Damaging Guidance in Banking

April 14, 2025

As the incoming Administration looks for ways to rationalize regulation and promote economic growth, one obscure but important candidate emerges: the federal banking agencies' Model Risk Management Guidance. It is a set of check-the-box instructions on how banks should validate and document the models they use across all aspects of their operations. It has disrupted bank operations; created a massive compliance bureaucracy; hampered banks' efforts to make effective use of AI; and impeded banks from innovating in everything from lending to anti-money laundering monitoring to cybersecurity. Its application has also varied greatly from examiner to examiner. Moreover, that manual is now 14 years old, and has never been updated to reflect the revolution in computer analysis that has occurred since its adoption.

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2) Treasury Market Resiliency and Large Banks' Balance Sheet Constraints

Feb. 6, 2025

The U.S. Treasury market faces increasing intermediation challenges that could threaten its stability and resilience. Since 2007, outstanding Treasury securities have grown nearly fourfold relative to primary dealer balance sheets, as post-crisis regulatory capital requirements have constrained dealers' ability to make markets effectively and reduced market depth.

The decline in intermediation capacity is evident in some of the changes seen in the composition of bank balance sheets. Large banks, which usually include a primary dealer entity, have significantly increased their Treasury holdings. Data from regulatory reports shows that the share of U.S. Treasuries relative to total assets has expanded from 3 percent in 2013 to 11 percent in 2024. Other high-quality liquid assets such as deposits at Federal Reserve banks and agency mortgage-backed securities have also increased materially in recent years.

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3) A Better M for CAMELS

Feb. 13, 2025

While Management is a standalone component of the CAMELS regime, it is important to note that every other ratings component already includes management as a factor:

• Capital: "The ability of management to address emerging needs for additional capital" and "Prospects and plans for growth, as well as past experience in managing growth."
• Asset Quality: "The adequacy of loan and investment policies, procedures, and practices" and "The ability of management to properly administer its assets"
• Earnings: "The adequacy of the budgeting systems, forecasting processes, and management information systems in general."
• Liquidity: "The capability of management to properly identify, measure, monitor, and control the institution's liquidity position, including the effectiveness of funds management strategies, liquidity policies, management information systems, and contingency funding plans."
• Sensitivity to Market Risk: "The ability of management to identify, measure, monitor, and control exposure to market risk given the institution's size, complexity, and risk profile."

The standalone "M" is therefore notable because it evaluates management untethered to any financial risk, and is therefore wholly subjective and variable. It is where immaterial and non-financial issues like "reputational" risk can manifest themselves, or simply displeasure with how management is behaving.

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4) The 3 Letters at the Heart of Bank Supervision Dysfunction

Jun. 25, 2025

As the federal banking agencies consider how best to reform the bank examination process, a crucial issue will be the role of a "Matter Requiring Attention," or MRA. It is the most common tool by which agency examiners require banks to change their practices to meet examiner preference, yet MRAs are largely unknown to the public and most policymakers. This lack of awareness is understandable given that MRAs are nowhere mentioned in law or regulation, but instead were invented by the agencies through guidance documents issued without notice and comment. The agencies consider all MRAs to be "confidential supervisory information" and therefore banks are barred from disclosing them publicly, under threat of criminal sanction.

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5) Redundant, Costly and Inaccurate: The U.S. Bank Liquidity Regime Needs a Rethink

May 28, 2025

While liquidity risk has always been a focus of bank examination and regulation, the Global Financial Crisis prompted a substantial expansion of liquidity oversight. The U.S. framework for limiting liquidity risk now includes five components: ongoing examination and horizontal reviews; two numerical requirements based on international standards; internal stress testing requirements; and resolution and recovery requirements. That framework is overly complex and produces inaccurate estimates of liquidity strengths, and its components are often redundant. In the wake of the crisis, regulators perhaps understandably adopted an "everything everywhere all at once" approach to liquidity oversight, but 15 years later, a thoughtful review is required.

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6) Rationalizing Federal Reserve Examination Practices: A Return to the Law

Jul. 8, 2025

Currently, the Treasury Department and federal banking agencies are studying ways to rationalize the bank examination process, and one obvious target is significant duplication of effort from the banking agencies. In areas from cybersecurity to credit underwriting to anti-money laundering, multiple agencies conduct their own examinations, asking the same questions and requesting the same documents. The result is a Tower of Examination Babel, with banks distracted or disabled from the core business of lending as they devote time and resources to overlapping, and in some cases conflicting, examiner demands.

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7) The Ongoing Distortion of the Internal Liquidity Stress Test

September 26, 2025

Two post-crisis regulatory requirements, the liquidity coverage ratio and the Federal Reserve's internal liquidity stress testing requirement, were originally designed to work together and provide complementary assessments of large banks' liquidity risk. The LCR was designed and intended to provide a standardized view of liquidity risk using uniform run-off and outflow assumptions set by regulation, while the ILST requirement was intended to provide a firm-specific view by directing each bank to conduct an internal liquidity stress test that reflects its own unique and idiosyncratic risk profile and historical experience. While that conceptual approach was sound policy, the supervisory process has effectively converted the ILST requirement into a second standardized liquidity measure that is similar to the LCR but for one key difference - one-size-fits-all assumptions are dictated to banks by examiners through confidential examination guidance, rather than by notice-and-comment regulation.

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8) Stablecoin Risks: Some Warning Bells

Nov. 3, 2025

The GENIUS Act, a recently enacted U.S. stablecoin law, attempts to make stablecoins a viable payment instrument by requiring that they be backed by high-quality assets and redeemable on demand at a fixed dollar value. Even with those protections, stablecoins are likely to pose risks to retail investors, borrowers and lenders, and, consequently, the financial system.

This note describes two significant sources of risk. First, despite guarantees that they can be redeemed at a fixed dollar value, stablecoins can (and do) lose value, undermining their viability as a means of payment. Second, retail investors have the option to lend their stablecoins via DeFi lending platforms in exchange for interest payments. But lenders can incur significant losses or become unable to redeem their stablecoins from DeFi lending platforms, even if the stablecoin itself is fully backed by high-quality assets. This risk arises because stablecoin borrowers primarily use the borrowed stablecoins to make highly levered purchases of crypto assets. DeFi lending platforms operate like highly levered banks. However, contrary to traditional banks, DeFi platforms do not have deposit insurance or access to a lender of last resort, nor are they held to capital or liquidity requirements or regular examination.

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9) Deep Dive: DFAST 2025 Stress Test Scenarios

Feb. 7, 2025

On Feb. 5, 2025, the Federal Reserve released the severely adverse scenario and the global market shock (GMS) component for the supervisory stress tests, which will be used to calculate the stress capital charge imposed on large banks. The severely adverse scenario is used to assess a bank's ability to withstand a severe macroeconomic recession and to set a bank-specific capital buffer, while the GMS is imposed on banks with significant trading operations, resulting in additional stress losses that contribute to the stress capital charge.

This charge is determined by the decline in each bank's common equity tier 1 capital ratio under the severely adverse scenario, with a larger decline resulting in a higher charge. Failure to maintain the required level of minimum capital, including the stress capital charge, severely restricts a bank's ability to distribute capital to shareholders.

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10) The Potential Adverse Consequences of a Credit Card Interest Rate Cap

May 19, 2025

Bipartisan legislation to cap credit card interest rates at 10 percent was recently introduced into the U.S. Senate. This blog post briefly summarizes the content of a paired research note on the potential effects of the proposed cap on consumers' access to card credit, based on analysis of data from the Federal Reserve Board's triennial Survey of Consumer Finances (SCF).

Simply put, it generally will not be feasible for banks to reduce interest rates to meet the cap for all current customers with rates above the cap, nor for similarly situated future customers. The cap would hinder access to credit for over 14 million American households and would force those households to turn to costlier and less-regulated alternatives. The credit card market in the U.S. is competitive, with multiple banks seeking to attract and retain customers by offering favorable terms. Moreover, the 2009 Credit Card Act has made credit card pricing more transparent and equitable. Therefore, a credit card interest rate is closely tied to the cost of providing the line of credit, including the risk that the borrower may default.

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