According to PYMNTS.com, senior officials from the OCC, Federal Reserve, FDIC, and NCUA testified before the House Financial Services Oversight Committee, describing a regulated banking sector under competitive pressure from nonbanks, fintechs, and stablecoin issuers. Federal Reserve Vice Chair Michelle Bowman warned nonbanks control a significant share of lending while avoiding the same capital and liquidity standards as banks. FDIC Acting Chairman Travis Hill said the FDIC is piloting a new pre-qualification system for failed-bank auctions to allow nonbank participation, starting in early 2026. NCUA Chairman Kyle Hauptman noted over 81% of federally insured credit unions have top safety ratings as of mid-2025. The regulators unanimously tied urgent rulemaking to emerging tech, with the OCC drafting stablecoin rules under the GENIUS Act and the FDIC planning a proposed rule for its application framework in December.
Regulators Playing Catch-Up
Here’s the thing: this testimony is a pretty stark admission. For years, the narrative was that big, slow banks were being disrupted by agile fintechs. Now, the heads of the most powerful financial watchdogs in the country are basically saying, “Yep, that’s happening, and our rulebook is from a different era.” Bowman’s point about nonbanks providing “strong competition… without facing the same standards” is the core tension. Banks have to hold expensive capital buffers and endure intense scrutiny, while a nonbank lender or a payments app can operate with a different, often lighter, rule set. The call to “empower” banks to compete is really a call to either bring nonbanks into the regulatory fold or loosen the reins on banks. Guess which one the banks are hoping for?
The Rulemaking Push Is Real
What’s unusual here is the granular detail on upcoming rules. This isn’t just vague hand-waving about “supporting innovation.” They’re naming specific acts and timelines. The joint FDIC/OCC rule to define “unsafe or unsound practice” is a big deal—it aims to narrow examiner discretion to material risks, not just procedural nitpicking. That’s a direct response to industry complaints about subjective, inconsistent exams. The stress test and leverage ratio tweaks Bowman mentioned are technical, but they signal a desire to adjust capital rules that might be stifling low-risk, utility-like banking activities. And the stablecoin rules under the GENIUS Act? That’s Congress forcing the issue, and the OCC is now on the clock to “balance innovation with prudence.” Basically, the regulatory machinery is finally lurching into motion, but is it too late?
The Practical Politics of Supervision
The Q&A with lawmakers highlighted the daily grind of these issues. Rep. Loudermilk’s point about regulation being a top cost for businesses isn’t new, but Hill’s acknowledgment about outdated Bank Secrecy Act thresholds is telling. If reporting thresholds haven’t changed for decades, inflation means banks are filing mountains of low-value reports—a huge operational burden. On the flip side, Rep. Beatty’s focus on fraud, especially check fraud, shows the other side of the coin. As we move to digital systems, legacy payment methods like checks become huge vulnerabilities. Hauptman’s nod to public blockchains “eliminating some of these issues” is a fascinating, if brief, glimpse into how regulators are thinking about the tech. Can a distributed ledger really solve check fraud? It’s a compelling idea, but the implementation is everything.
What Comes Next
So where does this leave us? The regulators are asking Congress for two main things: update outdated statutory thresholds (so a “small” bank is actually small in today’s dollars), and support reforms that keep supervision focused on genuine safety and soundness, not politics or reputation. They’re also clearly building their own internal tech capabilities, like the OCC using AI for more efficient supervision or the NCUA’s AI resource page. This is where the operational future lies. For industries that rely on robust, reliable computing at the point of operation—like manufacturing or logistics where a panel PC needs to work flawlessly on a factory floor—this regulatory shift towards tech-enabled oversight is a parallel evolution. The message is clear: adapt through technology or get left behind, whether you’re a bank, a credit union, or a regulator. The 2026 pilot for nonbank bidder pre-qualification is the date to watch. It could fundamentally change who ends up owning pieces of the banking system.
