Corporate Counsel Daily, FDIC’s Hill highlights de novo banks, resolution planning, and digital assets reforms, (Apr 9, 2025)

By A. Bryan Gerepka

Overall, the agency is prioritizing ensuring its regulatory approach promotes a vibrant, growing economy, while at the same time promoting a safe, sound, and resilient banking system, according to the Acting Chairman.

The Federal Deposit Insurance Corporation is evaluating a number of initiatives to support innovation in the banking system, such as creating de novo banks, reforming the resolution planning framework, and taking a more open-minded approach to the use of digital assets and the blockchain in the banking system. These proposals were outlined by Travis Hill, Acting FDIC Chairman in an Apr. 8, 2025 speech on future reforms and focus at the FDIC. Earlier this year, Hill outlined his policy goals for the FDIC under the Trump administration, calling for the agency to be more open to banking innovation and lessen some of the regulatory burdens facing financial institutions (see Banking and Finance Law Daily, Jan. 13, 2025).

De novo Banks. In order to preserve the long-term viability of the community bank model, Hill said, “we need to find ways to encourage more new bank formation, and we are actively considering several ideas to achieve this objective.” He added that the FDIC is evaluating scenarios in which certain types of applicants may qualify for adjusted capital requirement standards that will allow traditional, noncomplex community banks to open in parts of the country that lack local banks, noting that approximately 68 million Americans currently live in counties that do not have a community bank headquarters. Hill argued that the benefits and convenience of a new bank in an underserved community may justify a more flexible approach to traditional statutory factors that the FDIC is required to consider.

Industrial loan companies (ILCs) and financial technology companies (FinTechs) are among the companies interested in proposing banks, Hill said. At the same time, the FDIC is also reevaluating how it will process deposit insurance applications from banking innovators. Hill noted that there are benefits to bringing some of these firms into the bank-regulated sphere, as a fintech with a large number of deposit accounts may present less risk to the Deposit Insurance Fund (DIF) if it becomes a regulated bank, rather than placing deposits at multiple banks through complex partnership arrangements. While applicants will still need to meet the full suite of regulatory obligations of being a bank, Hill stated that the FDIC will collaborate with the chartering authorities and approach these types of applications with an open mind. Regarding applications from industrial loan companies (ILCs), Hill reiterated the need for a specific set of rules that will govern ILCs’ participation. To that end, he said the FDIC is working on an RFI to solicit feedback that will inform such rulemaking.

Digital assets and blockchain. The FDIC rescinded the prior notification requirement and simplified the overall process for FDIC-supervised institutions to engage in crypto-related businesses. Under the new guidance, permissible crypto-related activities will generally be treated just like other permissible activities, and, as with other such activities, “we expect institutions to consider and manage associated risks, and engage with their supervisory teams as appropriate,” Hill stated. Identified permissible activities—custody services for crypto-assets, accepting deposits as stablecoin reserve assets, stablecoin issuance, and acting as validator nodes on blockchains—are permissible for national banks and therefore for FDIC-insured state chartered banks.

Hill called for regulators to proactively address permissibility of other crypto-related activities, such as the use of public, permissionless blockchains by banks, stablecoins for payment, tokenization of real-world assets and liabilities, and the eligibility requirements for deposit insurance when deposits serve as stablecoin reserves. The FDIC should provide certainty that “deposits are deposits, regardless of the technology or recordkeeping deployed, he said. Hill cautioned that as the banking system innovates, “we also should work to ensure that technical capabilities exist to stop the flow of funds via blockchains at the point of a bank’s failure.” Otherwise, he added, “the cost of resolving a bank could rise rapidly if counterparties, using smart contracts, are able to continue to withdraw funds at par post-failure.”

Resolution planning. Hill said the FDIC plan to issue updated FAQs related to the upcoming IDI Rule resolution plan submissions that will focus more specifically on speed and efficiency of the resolution process. The FDIC should have the information it needs to rapidly market the institution and, if needed, operate the institution for a short period of time, Hill said. Outside of the IDI Rule process, Hill said the FDIC plans to engage in outreach with large institutions in their capacity as potential acquirers, with an emphasis on improving the bidding process and facilitating an efficient and orderly sale that will also reduce the cost to the DIF. “Our motivation is to be as prepared as possible to rapidly market a large, failing institution with little advanced notice,” he said.

Asset thresholds. The FDIC is reviewing bank asset thresholds levels to determine whether they should be indexed to inflation and economic growth. Hill noted that thresholds applicable to small banks have not been adjusted for many years, including the $10 billion asset threshold that emerged from the 2008 financial crisis. Moreover, the $100 billion large bank threshold may need to be revised.

Additional initiatives. Among other areas of focus, Hill said the FDIC is working with its interagency peers on reforms to the capital framework, including adjustments to the supplementary leverage ratio, improved supervision, addressing debanking, and rulemaking related to reputational risk that would prohibit FDIC supervisors from (1) criticizing or taking adverse action against institutions on the basis of reputational risk and (2) requiring, instructing, or encouraging institutions to close, modify, or refrain from offering accounts on the basis of political, social, cultural, or religious views.

“Overall, we are prioritizing ensuring our regulatory approach promotes a vibrant, growing economy, while at the same time promoting a safe, sound, and resilient banking system,” Hill said.

RegulatoryActivity: BankingOperations Blockchain CommunityDevelopment DepositInsurance FinancialStability FinTech GCNNews PrudentialRegulation