Bank Regulators Continue Regulatory Relief Efforts

03/04/26

Federal banking regulators continue to advance targeted reforms designed to modernize outdated rules while maintaining the core consumer protections that underpin the financial system. Two recent developments highlight this shift: the Office of the Comptroller of the Currency (OCC) finalized rule changes eliminating an obsolete mortgage data reporting requirement and expanding streamlined licensing procedures for banks, while federal regulators have also begun laying the groundwork for potential reforms to the Liquidity Coverage Ratio (LCR). Together, these actions signal a broader effort to right-size regulation-removing duplicative requirements while preserving the safeguards that protect consumers and the stability of the banking system.

The OCC's most immediate change rescinds 12 CFR Part 27, known as the Fair Housing Home Loan Data System. Originally adopted in 1979, the rule required national banks to collect and maintain detailed data on mortgage applications, approvals, denials, and borrower characteristics for fair housing monitoring purposes. Over time, however, this system became largely duplicative of the data already collected under the Home Mortgage Disclosure Act (HMDA). With HMDA serving as the primary national framework for mortgage data reporting, the OCC determined that maintaining a separate reporting structure for national banks created unnecessary compliance burden without providing meaningful supervisory benefit. By eliminating Part 27, regulators are removing a redundant layer of reporting while still preserving the primary tools used to monitor lending practices.

Importantly, the change does not alter banks' core fair lending obligations. Financial institutions subject to HMDA must continue reporting mortgage lending data under Regulation C, including information on loan applications, borrower demographics, loan pricing, property location, and application outcomes. Regulators will continue to rely on HMDA data alongside enforcement authorities under the Equal Credit Opportunity Act and the Fair Housing Act to monitor for discrimination and ensure access to credit. In other words, the underlying consumer protections remain firmly in place-the rule change simply eliminates an outdated system that overlapped with existing reporting frameworks.

The OCC also finalized a rule updating its licensing requirements for national banks and federal savings associations. The changes expand expedited review procedures and simplify the application process for certain corporate activities-steps designed to make it easier for banks, particularly community institutions, to complete routine transactions and organizational changes.

At the same time, federal regulators are signaling a willingness to revisit the Liquidity Coverage Ratio (LCR)-a post-financial crisis rule that requires large banks to hold sufficient high-quality liquid assets to withstand a 30-day stress scenario. The Federal Reserve, FDIC, and OCC recently rescinded prior guidance related to the rule, indicating they intend to solicit public comment and explore potential reforms to the current framework. Policymakers have increasingly raised concerns that the current liquidity regime may unintentionally discourage lending or create incentives for banks to hold excessive low-yield liquid assets rather than extending credit into the economy. Some policymakers have also suggested recognizing additional liquidity sources-such as pre-positioned collateral at the Federal Reserve's discount window-as part of banks' liquidity buffers. While no formal rule changes have been proposed yet, the regulatory discussion signals an important shift in thinking. Revisiting liquidity rules could allow regulators to maintain strong safeguards while ensuring that banks are not constrained from deploying capital to support economic growth.