Our Take: financial services regulatory update – March 28, 2025

Change remains a constant in financial services regulation. Read "our take" on the latest developments and what they mean.

Current topics – March 28, 2025

1. Senate holds confirmation hearings as agencies rescind Biden-era actions.
2. Banking agencies rescind 2023 Community Reinvestment Act modernization
3. FHFA rescinds key Biden Administration actions
4. On our radar

1. Senate holds confirmation hearings as agencies rescind Biden-era actions.

What happened? On March 27th, the Senate Banking Committee (SBC) held a confirmation hearing for Paul Atkins to lead the SEC, Jonathan Gould to be Comptroller of the Currency, and Luke Pettit to be the Assistant Treasury Secretary for Financial Institutions.
What did the nominees say? The hearing featured questions for all three nominees across a variety of topics:
- Debanking. SBC Chairman Tim Scott (R-SC) pressed both Gould and Atkins on debanking and both nominees committed to doing what they can to end the practice, including by removing references to reputational risk in examination handbooks (as Acting Comptroller Rodney Hood has already done) and providing clarity for legally permitted digital asset activities. Gould expressed his belief that regulators use reputational risk as a pretext for other motives and that there are more quantifiable risks for them to consider such as litigation and compliance risk.
- Digital assets. Gould and Atkins also committed to taking actions to foster innovation in digital assets. Gould said he would work to determine ways that banks can engage with lawful digital asset activities in a safe and sound manner while Atkins said he would prioritize providing a “firm regulatory foundation for digital assets through a rational coherent and principled approach.”
- Regulation. Each of the nominees signaled support for streamlining regulatory requirements, particularly for smaller institutions. Pettit highlighted the importance of community banks for reaching unbanked populations and Gould said that they shouldn’t be treated the same way as large banks. Atkins touted his past experience at the SEC, where he emphasized careful cost benefit analysis when considering new regulations, and expressed his view that burdensome regulations stifle capital formation. He also said that currently required disclosures are too long, redundant and, in some cases, unnecessary.
- Supervision. Pettit described the 2023 bank failures as reflecting issues with supervision rather than regulation. Gould agreed with this, saying that supervisors of the failed banks failed to focus on significant financial risks. When asked about his previous criticism of fines as an enforcement method that unfairly punishes shareholders, Atkins said that the SEC would continue to use monetary penalties to assess compliance but that it “depends on the situation.”
- Specific SEC policies. Atkins received a number of questions on specific SEC initiatives. He criticized the SEC’s focus on environmental, social and governance (ESG) factors under Gensler and said that “we need to make sure firms are focused on investments and not politics.” On the Consolidated Audit Trail (CAT), he said he would reexamine the personally identifiable information (PII) collected and that “we should revisit the costs and benefits” when asked if he supported eliminating the CAT altogether. When asked about risks of the inclusion of private equity and investment funds being included in exchange traded funds (ETFs) offered to retail investors, Atkins indicated that there are existing protective mechanisms like diversification requirements and SEC approval processes.
What’s next? The SBC will vote on the nominations and if they are advanced, they will receive a vote in the full Senate.

Our Take

Administration and Congressional majority alignment on display. Despite some criticism from Democrats, all of the nominees are likely to be confirmed as soon as the Senate can organize the necessary votes. Accordingly, the Republican majority in Congress is set to have close allies at the regulatory agencies to work towards joint goals of advancing digital asset innovation, eliminating business activity-based debanking and streamlining regulatory requirements. Having similar topics addressed by both Gould and Atkins demonstrated that these initiatives will be promoted across the financial ecosystem. For example, as the OCC seeks to be more permissive of lawful digital asset activities by banks, the SEC will seek to clarify the framework that defines the legality of these activities for digital asset companies.

Supervision is changing focus, not going away. With experience at both the regulatory agencies and Congress, these nominees have a demonstrated respect for upholding safety, soundness and investor protection. While it is clear that the agencies may depart from the Biden Administration’s approach to digital assets and ESG, financial institutions should remember that supervisors intend to still identify and penalize violations in areas like financial risk management and fraud. The new agency leaders may also find it difficult to undo relatively mature requirements. For example, Atkins will likely address some CAT requirements to protect privacy and reduce costs but is less likely to remove it altogether as it replaced fragmented audit trails and reporting has been in place since the last Trump Administration. However, while Atkins said that he would retain fines as an enforcement mechanism, he is likely to reduce their scale and focus penalties on individuals rather than shareholders.

2. Banking agencies rescind 2023 Community Reinvestment Act modernization

What happened? On March 28^th, the Fed, FDIC and OCC (the Agencies) released a joint statement announcing a forthcoming proposal to rescind the Community Reinvestment Act (CRA) rule issued in October 2023 and reinstate the prior CRA framework.
What did the October 2023 rule do? The rule made a number of changes to the CRA framework including (1) revising thresholds for small, intermediate and large banks; (2) expanding the delineation of assessment areas beyond the areas surrounding physical branches to new “Retail Assessment Areas”; (3) defining categories of activities that support community development; and (4) requiring large banks to collect and report volumes of data on deposits and retail lending to be used in cumbersome and complex tests for peer comparison.
What’s next? The proposal to rescind the October 2023 rule and reinstate the previous CRA framework is expected to [KA1] be subject to a notice and comment period before becoming final. The joint statement notes that the Agencies “will continue to work together to promote a consistent regulatory approach on their implementation of the CRA.”

Our Take

Back to the drawing board. The rescission of the 2023 CRA rule was expected following legal challenges, industry opposition, and recent statements from regulators. While the industry, regulators, and community groups all agree that modernizing the 48-year-old CRA to account for digital banking and provide transparency into activities that meet CRA obligations is past due, many objected to the way the rule modified assessment areas, the complexity of required calculations and data collection, and the supervisory discretion afforded by the rule. The Agencies have stated that they will work together to promote a consistent CRA approach but considering the challenges of coordination and complex considerations necessary to propose a new framework, alongside expected cuts to agency staff, we do not expect to see a new proposal any time soon. In the meantime, concerns with the pre-October 2023 CRA framework remain, including an outdated assessment area framework in the age of digital banking and an informal – and often inconsistent – process to clarify CRA activities. However, financial institutions are well accustomed to these challenges and are expected to [KA1] be relieved to maintain their mature CRA compliance programs – for now.

3. FHFA rescinds key Biden Administration actions

What happened? Following his confirmation as FHFA Director on March 14th, Bill Pulte has taken a number of steps to move the agency in a new direction, including by rescinding several actions from the previous Administration and making personnel changes.
What actions did the FHFA rescind? Over the past week, Pulte has rescinded a number of actions taken under the previous Administration, including:
- A directive requiring that Fannie Mae and Freddie Mac require borrowers purchasing multifamily properties to meet minimum standards for rental payment flexibility and lease notices;
- An order establishing FHFA expectations for compliance with protections against unfair and deceptive acts and practices;
- An order that Fannie Mae and Freddie Mac adopt climate risk management frameworks;
- An order to terminate Special Purpose Credit Programs (SPCPs) providing underwriting flexibility and financial support to certain borrowers;
- Certain requirements to engage in equitable housing finance planning and reporting; and
- Borrower education tools around energy efficiency.

These actions follow personnel decisions by Pulte that include dismissing several Board members and executives at Fannie Mae and Freddie Mac and a return-to-office mandate. Pulte was also installed at the Board Chair of both Fannie Mae and Freddie Mac.

What’s next? The actions taken over the past week are effective immediately. While Pulte acknowledged in his confirmation hearing that bringing Fannie Mae and Freddie Mac out of conservatorship is an important goal, he has also stated that it will take some time to do so with due care to confirm safety and soundness.

Our Take

Pulte has set a course for the FHFA in line with the Administration’s priorities. The steps taken by Pulte over the past two weeks follow now-familiar themes from speeches and actions at other financial agencies, including loosening “burdensome” requirements, eliminating climate and “DEI” expectations, and refocusing on core agency missions. While many of these actions appear at face value to significantly reduce compliance expectations and eliminate certain programs, their practical impact is expected to be more limited. For example, bank supervisors and state attorneys general can continue to enforce against unfair, deceptive and abusive acts and practices; rental flexibility and lease notice requirements are required by many states; and climate risk remains an important consideration under areas such as credit risk. In what has become a theme under the new Administration, while agency expectations may be categorized differently, the outcome of firms’ risk decisions and consumer practices still matter.

4. On our radar

These notable developments hit our radar recently:

FDIC rescinds prior notification crypto requirement. On March 28^th, the FDIC rescinded its 2022 Financial Institution Letter (FIL) that established a requirement for FDIC-supervised institutions that wish to engage in crypto-related activities to notify the FDIC before doing so. The rescission is accompanied by clarification that FDIC-supervised institutions may engage in permissible crypto-related activities without receiving prior approval.

CFTC withdraws crypto guidance. On March 28^th, the CFTC withdrew two staff advisories, one on virtual currency derivative product listings and another on risks related to clearing digital assets. The CFTC states that the withdrawals reflect additional experience with virtual currency derivatives and to clarify that its regulatory treatment of these products may [KA1] not vary from its treatment of others.

SEC stops defending climate disclosures. On March 27^th, the SEC voted to end its legal defense of rules requiring disclosure of climate-related risks and greenhouse gas emissions. Following the vote, the agency sent a letter to the Eighth Circuit Court of Appeals stating that the agency withdraws its defense of the rules.

CFPB to settle late fee rule litigation. On March 24^th, a federal judge in the Northern District of Texas Federal Court granted the CFPB 30 days to settle a lawsuit challenging the agency’s credit card late fee rule. CFPB attorneys have stated that they are optimistic that an agreement with the plaintiffs can be reached.

CFPB to revoke “buy now, pay later” rule. On March 26^th, the CFPB requested to stay litigation against the agency’s interpretive rule that would extend credit card protections to “buy now, pay later” purchases, explaining that the agency intends to revoke the rule.

CFPB vacates settlement against mortgage lender. On March 26^th, the CFPB announced that it will vacate a settlement against a mortgage lender and return the associated monetary penalty. As part of the announcement, the agency criticized the previous Administration finding evidence of discrimination based on racial disparities in mortgage applications as opposed to specific instances of discriminatory conduct.

Senate votes to overturn CFPB overdraft rule. On March 27^th, the Senate passed a resolution under the Congressional Review Act (CRA) to overturn a CFPB rule limiting overdraft fees. The House must also approve the resolution for the rule to be overturned. If the rule is struck down, the CFPB would be prohibited from issuing a “substantially similar” rule without Congressional approval.

Acting Comptroller speaks on innovation and affordable credit. On March 27^h, OCC Acting Comptroller Rodney Hood spoke on the role of innovative financial technology to promote financial inclusion for underserved communities. He explained that the agency will refocus initiatives such as Project REACh to focus on financial inclusion, for example by developing alternative credit metrics for consumers lacking a credit score.

Uyeda and Cook speak at SIFMA conference. At this week’s SIFMA C&L Annual Seminar, Acting SEC Chairman Mark Uyeda and FINRA President Robert Cook offered remarks on their accomplishments and future policy goals. Uyeda highlighted actions to delay and revisit rulemaking such as expanded central Treasury clearing and urged the industry to provide feedback. Cook outlined priorities including updating the FINRA rulebook, seeking amendments to securities lending and TRACE reporting, and helping firms with fraud and cybersecurity protections.

Download Our Take: PwC financial services update – March 28, 2025

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Change remains a constant in financial services regulation. Read "our take" on the latest developments and what they mean.

Current topics – March 28, 2025

1. Senate holds confirmation hearings as agencies rescind Biden-era actions.

Download Our Take: PwC financial services update – March 28, 2025

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