Banking and Finance Law Daily Wrap Up, BANKING OPERATIONS—Sen. Warren urges OCC to withdraw proposal that rolls back safeguards for some large banks, (May 8, 2026)

By A. Bryan Gerepka

The Senator says the proposed rule would subject 26 of the nation’s largest banks to the same risk management standards as local community banks.

Senate Banking Committee ranking member Elizabeth Warren (D-Mass.) urged the Office of the Comptroller of the Currency to immediately withdraw the proposed rule that would exempt banks with assets below $700 billion from enhanced risk management requirements, citing its potential to weaken regulatory oversight of some of the nation’s largest banks and to threaten the stability of the broader economy.

The proposed rule, which raises the asset threshold from $50 billion to $700 billion, would exempt 26 of the 31 largest banks from heightened risk management and governance requirements implemented after the catastrophic 2008 financial crisis, Senator Warren wrote in a May 7, 2026, letter to OCC Chair Jonathan Gould. By removing enhanced requirements, bank examiners are less able to identify and address emerging risks before “they fester into larger problems,” she warned.

Senator Warren argued that the proposal ignores the serious risks posed by big banks with between $50 billion and $700 billion in assets. “Just three years ago, the second, third, and fourth largest bank failures in U.S. history were banks at the lower end of this size range,” she noted. These firms proved to be systemically important, requiring government intervention to protect more than $20 billion in uninsured deposits and a $160 billion-plus Federal Reserve liquidity backstop to prevent contagion in the banking system, the Senator added. The OCC’s claim that its proposal would apply to banks that “pose the greatest risk to the banking system” does not align with reality or recent history, she stressed.

Background. In January 2026, the OCC issued a notice of proposed rulemaking to increase the heightened standards threshold for covered banks to $700 billion in total consolidated assets, from $50 billion. “This recalibration would reduce regulatory burden while refocusing the guidelines on institutions whose size, complexity, and risk profile pose the greatest risk to the banking system,” the agency stated. Moreover, the measure would allow more institutions to adopt risk governance frameworks better suited to their size, and foster innovation in risk management practices, the OCC added.

The proposal would amend the guidelines’ definition of “covered bank” to mean any insured national bank, insured federal savings association, or insured federal branch of a foreign bank (i) with average total consolidated assets equal to or greater than $700 billion; (ii) with average total consolidated assets less than $700 billion if that bank’s parent company controls at least one covered bank; or (iii) with average total consolidated assets less than $700 billion if the OCC determines the bank’s operations are highly complex or otherwise present a heightened risk. The proposed rule would not apply to community banks, and comments on the proposal were due by March 2, 2026.

Deregulatory push. Senator Warren called the OCC's proposed rule part of a broad “toxic mix of big bank deregulation.” This includes firing bank examiners, weakening supervisory authority by limiting examiners' ability to initiate enforcement actions, allowing banks to take on more debt, and abandoning critical updates to the 1995 bank merger guidelines, thereby allowing the OCC to continue to rubber-stamp big bank mergers, the Senator noted.

Weakened oversight. The OCC, in its rulemaking notice, also rebutted concerns that weakened governance and risk management standards would encourage big banks to take on more risk to boost short-term profits and bonuses. The agency stated that the existence of “other laws and regulations would address and incentivize covered banks and their boards to implement and adhere to appropriate corporate governance processes and procedures. However, Senator Warren challenged the OCC's view. “This proposal, coupled with the agency’s suite of other deregulatory actions, would increase big bank executive bonuses and shareholder payouts, while setting the stage for catastrophic big bank failures and taxpayer bailouts,” Senator Warren stressed.

Against the backdrop of a sputtering U.S. economy, deteriorating private credit market, and commodity shocks resulting from the “President’s illegal and dangerous war in Iran,” this weakening of governance and risk management standards is unfolding at a precipitous moment, and the American public will likely pay the price in future economic downturns, Senator Warren wrote.

RegulatoryActivity: BankingOperations CommunityDevelopment FinancialStability OversightInvestigations PrudentialRegulation