BPInsights: August 9, 2025

New Executive Order Targets Regulatory Overreach Affecting Bank Account Access

The Administration issued an executive order on Thursday to promote access to financial services in America. The Executive Order aligns with the spirit of several ongoing efforts on Capitol Hill and among the financial institution regulatory agencies to address bank account access concerns driven by regulatory overreach and supervisory discretion.

The Bank Policy Institute, American Bankers Association, Consumer Bankers Association and Financial Services Forum issued a statement in response and published a set of principles that policymakers should consider as they work to implement the President's Executive Order. Importantly, the groups recommend that federal requirements must broadly and expressly preempt any non-federal fair access or account closure laws to avoid inconsistent requirements affecting customers across all 50 states.

A sample of the initiatives already underway includes:

• The FIRM Act. Sponsored by Senate Banking Committee Chairman Tim Scott (R-SC) in the Senate and Reps. Andy Barr (R-KY) and Ritchie Torres (D-NY) in the House, would help refocus supervision on material risks and objective metrics by prohibiting the prudential banking agencies from considering reputational risk in supervisory actions.
• Elimination of Reputational Risk in Exams. The Office of the Comptroller of the Currency (March 2025) and Federal Reserve (June 2025) announced they would eliminate reputational risk as part of the bank examination process. The FDIC has also signaled that it plans to move forward with a rulemaking taking similar action (April 2025).
• The FAIR Exams Act. Sponsored by Chairman French Hill (R-AR), seeks to establish a fair process for banks to appeal supervisory decisions, require regulators to complete examinations in a timely manner and create an independent office to apply much-needed accountability to supervision.
• The HUMPS Act. Sponsored by Rep. Scott Fitzgerald (R-WI), would increase transparency in financial institution supervision and work toward reforming the subjective CAMELS rating system.
• The SAFE Guidance Act. Sponsored by Rep. Dan Meuser (R-PA), would ensure transparency and limit abuse of regulatory "guidance" by requiring financial agencies to include a clear disclaimer on the first page of any guidance document. This disclaimer must state that such guidance does not carry the force of law and that noncompliance does not constitute a legal violation.

Five Key Things

1. eSLR Reform Aligns Leverage Requirement with Original Objective

When regulators introduced the eSLR in 2014, policymakers cautioned that it might become unduly binding and push banks toward riskier assets. Concerns were largely eased at the time based on the assumption that the eSLR would merely serve as a capital backstop, and reserve balances would shrink as the Fed unwound its crisis-era balance sheet. This change was also expected to ease binding constraints already facing several institutions.

It didn't.

Instead, the Fed began to oversupply reserve balances starting in 2019, and expanded its balance sheet even further during the pandemic. As a result, the leverage ratio has become more binding than regulators anticipated, forcing leading banks to limit crucial activities in Treasury markets, especially during times of stress, without improving financial stability.

Our latest blog post explores why the latest proposed recalibration - introduced on June 17 - will better balance safety with supporting healthy market activity.

2. Trump Nominates Economic Adviser Stephen Miran to Federal Reserve Board

President Trump announced plans on Thursday to nominate Stephen Miran, current chair of the Council of Economic Advisers, to the Federal Reserve Board. Miran will replace Adriana Kugler, who resigned last week to return to Georgetown University as a professor for the fall semester. Kugler's term expires in January 2026. Miran previously served as senior advisor for economic policy at the Treasury Department during the first Trump Administration and was a senior strategist at Hudson Bay Capital.

3. U.S. District Court Strikes Federal Reserve's 2011 Debit Interchange Fee Cap Rule

A federal judge in the U.S. District Court for the District of North Dakota issued a ruling Corner Post v. Board of Governors of the Federal Reserve System late Wednesday, vacating the Board's 2011 debit interchange fee cap rule. The court concluded that the Fed lacked authority under the Durbin Amendment to include certain costs in the fee cap calculation.

The Bank Policy Institute and The Clearing House Association issued the following statement in response:

"We are severely disappointed in the Court's interpretation of the Durbin Amendment. The payment system is secure, convenient and reliable because of significant investment by banks, and today's decision, if affirmed, would undermine that system. It would disincentivize innovation and perpetuate a misguided notion that banks should be forced to offer products and services without being able to recover the costs necessary to sustain those investments. We will evaluate the Court's decision and continue to pursue every avenue to ensure that banks can recover their costs and reasonable return, as the Durbin Amendment itself provides."

Corner Post, a North Dakota-based truck stop, filed a lawsuit against the Federal Reserve in 2021, arguing that the Fed's 2011 rule violated the Durbin Amendment. The rule requires the Fed to establish standards for assessing whether interchange revenue is "reasonable and proportional" to the costs incurred by issuers in processing debit transactions, and the plaintiffs argued that the Fed should not have permitted financial institutions to account for certain costs, such as the costs incurred in monitoring debit transactions, when calculating interchange rates.

The Court stayed its ruling, pending the resolution of any appeal to the United States Circuit Court for the Eighth Circuit.

4. European Banks Remain Well Capitalized in 2025 Stress Tests

The European Banking Authority's 2025 stress test found that major EU banks remain well-capitalized even under a hypothetical global trade breakdown and deep recession featuring a 6.3% GDP contraction, reported Bloomberg. The adverse scenario led to projected losses of €547 billion across 64 banks, but the average CET1 capital ratio fell just 3.7 percentage points to 12.1%, an improvement from the previous round of stress tests in 2023.

Most large institutions, including Deutsche Bank and BNP Paribas, experienced smaller capital effects than in the previous test, supported in part by higher net interest income. Southern European banks performed especially well, reported El País, especially Spain's Bankinter and CaixaBank. Bankinter saw the smallest capital drawdown of any bank in the exercise, with its CET1 ratio falling just 55 basis points, while CaixaBank's fell by 162 basis points-both well below the EU average of 304 basis points.

Unlike U.S. stress tests, the EBA's results do not directly limit banks' capital distributions. However, they reportedly play a role in how the European Central Bank sets institution-specific capital requirements known as Pillar 2 requirements, whose methodology and results are kept secret.

5. The Crypto Ledger

Here's the latest in crypto.

• Stablecoin Issuers Race to Evade GENIUS Act Requirements: The GENIUS Act, signed into law last month, prohibits issuers from paying interest on stablecoin deposits. Despite this, major stablecoin issuers like Coinbase and PayPal plan to continue offering "rewards" on stablecoin balances, reported Decrypt, ranging from 3-5%. Coinbase CEO Brian Armstrong defended the program, stating: "First, we are not the issuer. And second, we don't pay interest or yield - we pay rewards."
• Jury Split in Tornado Cash Trial: A U.S. District Court jury returned a split verdict in the case against Tornado Cash founder Roman Storm. Storm was found guilty of operating an unlicensed money-transmitting business but was acquitted of the more serious money laundering and sanctions violations.
• UK Financial Regulator Lifts Ban on Crypto Exchange Traded Products for Retail Investors. Retail investors will be able to begin accessing crypto exchange-traded products on the London Stock Exchange starting on October 8 after the Financial Conduct Authority lifted its ban late last week.
• Crypto asset capital rules: The European Banking Authority published draft regulatory technical standards explaining how banks should measure and manage their crypto-asset exposures under the EU's updated capital framework. The proposal imposes strict limits, especially for unbacked crypto like Bitcoin, which is capped at 1% of Tier 1 capital, and outlines how to calculate risks tied to these assets. Crypto can't be used as collateral, and while tougher valuation rules were considered, it deferred those changes until the broader EU crypto framework is finalized. The draft will now be considered for adoption by the European Commission before being transmitted to the European Parliament and Council.

In Case You Missed It

Traversing the Pond

Here's the latest in international banking policy.

• EBA moves to simplify resolution planning and cross-border coordination: The EBA proposed changes to simplify and streamline its technical standards on resolution plans and the functioning of resolution colleges. Key changes include consistency in the essential information to be included in the plan summary, a more focused plan content tailored to each institution or group and a clearer distinction between strategy selection and resolvability assessment. Comments are due by November 5, with a public hearing scheduled for September 16.
• ECB to apply "climate factor" to collateral in lending operations: The European Central Bank recently announced plans to incorporate a "climate factor" into its lending operations starting in the second half of 2026. They say the measure would adjust collateral valuations to reflect climate-related risks, particularly for assets issued by companies exposed to the green transition.

Coinbase Presses for Updates to Bank Secrecy Act with Digital ID Solutions

Coinbase urged Congress to update the Bank Secrecy Act in a new blog post this week, saying the law should reflect technological advances to reduce unnecessary data collection. Paul Grewal, Coinbase chief legal officer, argued that the current AML requirements are creating inefficiencies without meaningfully improving security. "The law is rooted in good intentions," he stated, "but good intentions only go so far when technological advances outpace a former reality." The post called for the adoption of cryptographic tools like zero-knowledge proofs to verify user identities and urged the Treasury Department to fulfill its congressional mandate to modernize the AML regime.

Senate Confirms Sean Cairncross as National Cyber Director

The Senate voted 59-35 to confirm Sean Cairncross as White House National Cyber Director. Cairncross previously served as a senior advisor to the White House Chief of Staff during President Trump's first Administration and held roles as a former Republican National Committee official and chief executive officer of the Millennium Challenge Corporation.