BPInsights: July 18, 2026

Key Takeaways: Warsh on Capitol Hill

Recently confirmed Federal Reserve Chairman Kevin Warsh appeared before the House Financial Services Committee and the Senate Banking Committee this week to deliver his first semiannual testimony. Here are some highlights.

• Supporting U.S. economic growth will be a priority as banking regulators finalize the Basel capital rule. In response to Sen. Mike Rounds (R-SD), Warsh said economic growth will be a focus as U.S. regulators revise the capital framework. "We should end up with a set of reforms in the United States that makes our financial system and our banks safer, sounder and more competitive," he said. The comment period on the Basel proposal ended last month. While supportive of collaboration and ongoing discussions with international regulatory counterparts, Warsh said during House testimony that the final policy outcomes should, "be in service of the American economy." .
• A tailored supervisory framework is essential to maintaining a highly competitive, diversified banking system. Warsh emphasized that a highly competitive, diversified banking system is "one of the unheralded secrets of the U.S. economy," expressing support for tailored regulation that enables such diversification. "One size does not fit all," he said in response to Rep. Roger Williams (R-TX).
• The novel risks associated with crypto make bailout prevention even more essential. Rep. Brad Sherman (D-CA) asked Warsh if the Fed would support crypto or stablecoins if they face a run, noting that the Fed established liquidity facilities to support money market funds in a previous downturn. "We're going to do everything we can to mitigate those sorts of extraordinary risks, if and when they were to come in the next four years. We want to be in a position where we're not bailing out anybody, including crypto," Warsh said, when Sherman asked him to commit that he would not bail out crypto and stablecoins.
• Decisions on access to Fed payment rails will remain grounded in independent risk assessments. Rep. Gregory Meeks (D-NY) asked Warsh if decisions about access to the Fed's payments system would remain grounded in impartial assessments of risk and safety, rather than political dynamics. "We're going to keep politics out of the Fed," Warsh responded. "We're going to stay focused on the responsibilities you've given us, and I think you highlight something very important. This new technology revolution, which is hitting the Federal Reserve and the economy, provides huge opportunities. The United States can lead in payments. Our economy can be the strongest in the world and improve its growth rate, but it's not without risks, and we at the Fed are going to strike the right balance between the challenges and the opportunities in payments and more broadly."
• Updating outdated tailoring thresholds remains a priority to align regulatory frameworks with a diverse banking ecosystem. Sen. Katie Britt (R-AL) asked Warsh about updates to regulatory thresholds. Warsh noted that Vice Chair for Supervision Michelle Bowman has briefed him on efforts to tailor regulation and supervision. "We want to tailor the rules and the capital so they serve the best interests of the U.S. economy, which I describe as a system that is safe, sound and competitive," Warsh stated.

To read the full takeaways from the hearings, click here.

Five Key Things

1. Bowman Urges Global Collaboration, Tailored Supervision, Flexibility

In a speech on Monday at a Bank Policy Institute event, Federal Reserve Vice Chair for Supervision Michelle Bowman recommended four principles that should guide policymakers' efforts to modernize financial regulation. Regulators should 1) prioritize material risks, 2) tailor regulation and supervision to banks' risk profiles, 3) promote transparency and accountability in rulemaking and supervision and 4) consider emerging risks and support responsible innovation, Bowman suggested. Bowman leads the Financial Stability Board's Standing Committee on Supervisory and Regulatory Cooperation, which will publish a consultation report this fall on modernizing financial regulation and supervision.

• Modernization in the U.S. Bowman offered updates on how modernization is proceeding in U.S. banking regulation, including the Basel capital proposal, the Fed's revamped approach to supervision, updating asset thresholds and assessing material risks.
• Flexibility. Bowman emphasized the need for flexibility among different countries' supervisory and regulatory approaches as the FSB oversees modernization efforts. "To ensure the effectiveness of our work together, the FSB should recognize the principles I have outlined today as each jurisdiction implements ongoing modernization efforts," she said. "At the same time, the FSB should encourage flexibility among approaches to ensure that modernization efforts are appropriate for individual jurisdictions. Efforts to prescribe and enforce strict rules that are not suitable for the diversity of institutions and authorities within individual jurisdictions ultimately erodes the FSB's effectiveness."

2. Agencies Release Guidance on Supervisory Data Collection

The federal banking agencies on Thursday established updated procedures for handling sensitive bank data during the supervisory process. The agencies' joint statement "discusses a coordinated approach to identifying highly sensitive data and documents and discusses enhanced procedures for the review of such information to reduce any cybersecurity risks while ensuring that the agencies have access to such information at all times during an examination." BPI's Heather Hogsett issued a statement in response: "The Office of the Comptroller of the Currency, the Federal Reserve Board and the Federal Deposit Insurance Corporation's statement today establishes a more secure and practical approach to handling sensitive data in the supervisory process. This helps to reconcile bank supervision with modern cybersecurity realities. By making clear that banks can maintain control of highly sensitive data within their own secure systems-and by directing examiners to use alternative methods such as on-site review and appropriately redacted materials-the agencies have reduced avoidable risk exposure without compromising supervisory effectiveness. In an environment of escalating cyber threats, limiting unnecessary movement of sensitive data is essential. Today's announcement evolves supervisory processes to meet these risks."

3. Custodia Bank Urges Supreme Court to Review Master Account Denial

Custodia Bank has petitioned the Supreme Court to review the Federal Reserve's denial of its request for a master account, according to Bloomberg. The Wyoming crypto bank sought access to the Fed payments system in 2020, and the Kansas City Fed denied its request in 2023, expressing concern about risks associated with its crypto-focused business model. After Custodia sued and lost at the district court level, the 10th Circuit Court of Appeals upheld the Fed's decision.

4. CFPB's Vought: New 1033 Rule 'Very Close'

The CFPB is "very close" to issuing a new proposal on financial data sharing under Section 1033 of the Dodd-Frank Act, Acting CFPB Director Russ Vought said in House testimony this week. Vought was testifying before the House Financial Services and Senate Banking Committees this week in semi-annual CFPB oversight hearings. "We are a supporter of open banking as a concept, and we're working hard on that rule," Vought said at the House hearing. The CFPB under Vought began efforts to rewrite the rule last year. The original rule is currently on pause amid litigation by BPI and its co-plaintiffs to ensure that the rule does not exceed the CFPB's authority and that consumers' sensitive financial data is protected. Other highlights of the hearings include:

• A focus on identifiable consumer harm over paperwork violations optimizes supervisory resources and reduces unnecessary regulatory burdens. Rep. John Rose (R-TN) emphasized that a risk-based supervisory framework allows the CFPB to focus on the greatest threats to consumers. Vought discussed CFPB efforts to streamline examination to focus on the most salient risks. "We have both freed up examiners, and then we've been very clear about our priorities," Vought said. "We want to find identifiable victims with measurable and material consumer damages, as opposed to just paperwork violations."
• The CFPB and banking agencies sticking to their swim lanes on supervision portfolios minimizes redundant oversight for financial institutions. "We've tried to not get in the way of the prudential regulators," Vought said to Rep. Roger Williams (R-TX). "We've tried to be very insistent that we stick to our portfolio, and to acknowledge that the regulated entities have many different regulators, and we've tried to take that approach and provide clarity on that front." The CFPB has exclusive jurisdiction under federal statute for supervising large banks' consumer law compliance.

5. When Can Banks Switch Charters? Clarifying What the Law Says

A recent dissent by Federal Reserve Governor Michael Barr on a bank's switch from a state to a national charter raises a question worth clarifying: when does U.S. law permit banks to convert charters? A new BPI blog post explains what the statute outlines.

• Background. A unique feature of the U.S. banking system is charter choice - a bank can choose to become a national bank, a state member bank or a state nonmember bank, and can therefore choose its primary regulator. Banks may also switch charters, and they consider a wide range of business and strategic factors when deciding which charter to pursue. Some commenters have argued that regulators are motivated by revenue or prestige incentives when determining charter conversion applications, leading them to approve charter conversions that allow banks to receive more lenient treatment. Congress addressed these concerns through the Dodd-Frank Act, which provides generally that a bank may not switch its charter when it is "subject to a cease and desist order," although this prohibition is subject to several exceptions.
• Recent Dissent. A recent public dissent by Governor Barr in the conversion by United Texas Bank from a state-member bank to a national bank, effectively (and bluntly) treats Section 612 as an absolute bar on conversions. Governor Barr asserted that while Section 612 includes statutory exceptions, United Texas Bank failed to make a "compelling argument" that its application fell within any such exception, without further elaboration. The statute is more nuanced, and so clarification is warranted. Learn more here.

In Case You Missed It

Traversing the Pond

Here's the latest in international banking policy.

• European Commission Releases Communication on Bank Competitiveness. The European Commission on Friday released a highly anticipated Communication on bank competitiveness, part of the bloc's effort to simplify regulation and boost economic growth. The Commission acknowledged fragmentation and complexity in its regulatory framework, as well as challenges in transposing Basel standards into the EU framework. The report focuses on three objectives: removing barriers to cross-border banking activity; accounting for the specific features of the EU when implementing international standards; and simplification of the bank regulatory framework. BPI issued a statement in response to the report.
• UK and US Pledge to Cooperate on Crypto Assets. The U.S. and UK committed to "seek to identify common approaches to the regulatory treatment of tokenised assets," according to initial recommendations from the Transatlantic Taskforce for Markets of the Future. The task force was established by Treasury Secretary Scott Bessent and his UK counterpart, Chancellor of the Exchequer Rachel Reeves. The two countries will "consider increased use of flexible regulatory mechanisms, as appropriate," according to the recommendations.

The Crypto Ledger

Here's the latest in crypto.

• GOP Senators Meet with President on Clarity. Senators including Sen. Cynthia Lummis (R-WY) and Sen. Bernie Moreno (R-OH) were set to meet with President Donald Trump on Thursday to discuss the Clarity Act, according to a POLITICO. The senators were planning to discuss "the entirety of the bill," Moreno said. In a Fox News interview on Wednesday, prior to the White House meeting, Lummis had said she planned to introduce updated language on the bill in the coming days. In the interview, Lummis said she expected the bill to be on the Senate floor the week of July 20. Majority Leader Thune intends to try and secure a vote on the Clarity Act later this work period.
• Tillis Floats Yield 'Circuit Breaker.' Sen. Thom Tillis (R-NC) suggested a potential "circuit breaker" provision in Clarity on stablecoin yield that would prevent deposit flight out of the banking system. "If you're against it on yield, because you think it's going to cause deposit migration, what if we come up with language that the FDIC, the OCC can have, as circuit-breaker language?" he said on Monday, according to Punchbowl News.
• Witt Departing. Patrick Witt, the White House's key crypto adviser, will leave his position on July 27 to report for military duty, according to POLITICO this week. Witt has served as the White House's point person on Clarity Act negotiations.

Supervision, Digital Assets: Gould Takes Stock of One Year Leading OCC

OCC Comptroller Jonathan Gould gave remarks this week taking stock of his efforts after one year leading the agency. Gould highlighted supervision reform and promoting innovation as particular accomplishments. "We began by refocusing supervision on what matters most: material financial risk," Gould said of the supervisory enhancements. "We have returned to a more transparent, consistent, and risk-based supervisory approach by clarifying expectations, improving consistency across examination teams and ensuring that supervisory decisions remain grounded in objective financial risks." The OCC also proposed raising the asset threshold for heightened standards, "so supervisory expectations better reflect the size, complexity, and risk profile of individual institutions," he noted, adding that the agency has taken steps to resolve "debanking" concerns.

Member News

Citi Impact Fund Pledges $25 Million Investment in Companies Bringing Innovation to Housing Access

The Citi Impact Fund on Thursday announced that it will invest $25 million in companies offering innovative initiatives for housing access, supply and affordability in communities nationwide. These investments will support Citi's Blueprint for Housing Opportunity initiative, a $60 billion, five-year commitment to increase and preserve the supply of housing in the U.S.

Upcoming Events

• 7/21/2026: HFSC Subcommittee on National Security, Illicit Finance and International Financial Institutions Hearing: Oversight of the Financial Crimes Enforcement Network
• 7/21/2026: HFSC Subcommittee on Housing and Insurance Hearing: Oversight of the Federal Home Loan Bank System
• 7/28/2026: Federalist Society Event on Clarity Act and Master Accounts Featuring BPI's Paige Paridon