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The FDIC seeks to stick to its statutory mandate while reducing impediments to fintech, innovation, mergers, bank formation, and efficient supervision.

By Arthur S. Long, Pia Naib, and Deric Behar

Just one day after being named acting chairman of the Federal Deposit Insurance Corporation (FDIC), Travis Hill revealed an agenda of priorities for the FDIC. Hill previewed many of the priorities during his January 10, 2025, remarks on FDIC policy issues at the American Bar Association (ABA), where he stated that “[t]he agency needs a new direction.” Taken together, the statements signal a clear divergence from FDIC leadership and policy objectives under the Biden administration, and a clear resolve to steer the FDIC on a fresh course.

Acting Chairman Hill highlighted the following areas of focus:

Regulatory Review and Purge: Review all FDIC regulations, guidance, and manuals to ensure they promote “a vibrant, growing economy,” and withdraw controversial proposals issued during the previous administration, including the 2024 Brokered Deposits proposal (for more information, see this Latham blog post) and the 2023 corporate governance and risk management guidelines proposal.

  • Then-Vice Chairman Hill called the Brokered Deposits proposal “a poor use of [FDIC] time and resources,” and did not support the corporate governance proposal for various reasons.

Bank-Fintech Partnerships and Crypto: Adopt a more open-minded and transparent approach to innovation and technology adoption, including fintech partnerships, digital assets, and tokenization.

  • In his ABA speech, Acting Chairman Hill noted some key steps for the FDIC to consider, including “a shift in supervisory attitude towards new technology”; “reinvigorating the innovation lab, FDiTech, . . . to directly engage with the private sector, examine the challenges banks face with technology adoption, and help develop solutions”; “hire more staff with hands-on experience working with new technologies”; and “consider issuing additional guidance on several topics, such as fintech partnerships, artificial intelligence, and digital assets and tokenization.”
  • He also argued that the FDIC’s approach to digital assets under the previous administration has stifled innovation, criticizing “Operation Chokepoint 2.0” and related debanking activities that have recently come to light (for more information, see this Latham blog post). He noted that “putting an end to any and all Choke Point-like tactics” is a critical first step, while “clearly and transparently describe[ing] for the public what activities are legally permissible and how to conduct them in accordance with safety and soundness standards.”

Bank Mergers: Enhance the merger approval process and replace the 2024 FDIC Statement of Policy on Bank Merger Transactions, which Acting Chairman Hill criticized for making the merger process “longer, more difficult, and less predictable” (for more information, see this Latham blog post and this blog post).

  • A statement from House Financial Services Committee Chairman French Hill on Acting Chairman Hill’s priorities notes that this priority echoes his own call to rescind the 2024 Statement of Policy “to prevent regulators from unfairly and indefinitely holding up mergers.”

Bank Formation: Encourage more de novo bank formation activity to promote the entrance of new participants in the banking sector.

Supervision: Improve the supervisory process so that core financial risks take precedence over process and compliance. During the ABA speech, Acting Chairman Hill criticized the common practice for “examiners to focus on a litany of process-related issues that have little bearing on a bank’s core financial condition or solvency.” The priorities also list the need for the FDIC to reevaluate the supervisory appeals process.

  • House Financial Services Committee Chairman French Hill noted that his own bipartisan Fair Audits and Inspections for Regulators’ (FAIR) Exams Act (introduced in the Senate on December 14, 2023), would be a good starting point, as it would require examining agencies to act quickly and transparently, while creating an independent review and appeals process under the Federal Financial Institutions Examination Council (FFIEC) (for more information, see this Latham blog post).

Resolution: Incorporate lessons from the bank failures of 2023 (for more information, see this Latham Report) to enhance the FDIC’s preparedness for resolving large financial institutions and improving the FDIC’s ability to facilitate the bidding process for the acquisition of failed banks.

  • On June 20, 2024, the FDIC issued a final rule updating the FDIC’s resolution plan regulations for covered insured depository institutions (CIDIs). The revisions were intended to support the FDIC’s ability to undertake an efficient and effective resolution under the Federal Deposit Insurance Act in case of large financial institution insolvency, failure, or FDIC receivership. Then-Vice Chairman Hill opposed the rule, objecting that comprehensive resolution plan requirements are too prescriptive and onerous, and do not justify the cost burden imposed on CIDIs (for more information, see this Latham blog post).

Capital and Liquidity: Streamline capital and liquidity rules to optimize the balance between promoting economic growth and institutional safety and soundness, and financial system resilience.

  • In his speech to the ABA, Acting Chairman Hill elaborated on this point further, noting that he “strongly opposed the 2023 [Basel III Endgame] proposal and expressed concerns that the 2024 (unpublished) reproposal needed additional work.” (for more information on the Basel III Endgame Proposal and reproposal, see this Latham Report and this Report).

Fair Access: Ensure that “law-abiding customers” have and maintain access to bank accounts and banking services (for more information, see this Latham Client Alert).

  • Relatedly, on January 24, 2025, the House Committee on Oversight and Government Reform announced an investigation into the alleged debanking of individuals and entities based on political viewpoints or involvement in certain industries such as cryptocurrency and blockchain. Such allegations appear to have been corroborated by a cache of redacted letters that the FDIC recently released under a court order pursuant to a Freedom of Information Act request (for more information, see this Latham blog post).

Bank Secrecy Act (BSA) Compliance: Advance efforts to modernize implementation of the BSA. Acting Chairman Hill noted in his ABA speech that “the current BSA regime creates an incentive for banks to close accounts rather than risk massive fines for inadequate BSA compliance.”

  • On June 20, 2024, the FDIC Board of Directors approved a joint Notice of Proposed Rulemaking for the Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) Program Requirements. The proposal aims to streamline the various banking agencies’ BSA compliance program rules to align with FinCEN’s proposed revisions to its existing program rule for banks. The objective is to have banks comply with one standard rather than differing program rule requirements between the banking agencies and FinCEN (for more information, see this Latham blog post).

Curb FDIC Overreach: Ensure the agency remains within its statutory mandates and “stops coloring outside the lines.”

  • Acting Chairman Hill is speaking about the FDIC’s foray into addressing climate risk-related issues, such as via membership in the international Network for Greening the Financial System (NGFS). In his ABA speech, he dedicated a segment to criticizing the FDIC’s recent “misguided focus on climate” and reiterated that “the banking agencies’ authorities in this area are limited to promoting the safety and soundness of institutions, not to using banks to pursue environmental policy.” Indeed, on his first day as acting chair, the FDIC announced its withdrawal from the NGFS, stating simply that “[t]he work of NGFS is not within the FDIC’s authorities and mandate.”

Workforce Culture: Reestablish a strong workforce culture within the FDIC in which misconduct is not tolerated and held to account.

  • This is responsive to various allegations and reports in the past year describing a toxic workplace culture at the FDIC, including misconduct and harassment (for example, see here, here, and here). This effort will be required to take place in the context of a Trump executive order to terminate all diversity, equity, and inclusion (DEI) programs within the federal government.

Internal Efficiency: Pursue efficiencies inside the FDIC to ensure the agency is serving as a responsible steward of the Deposit Insurance Fund.

Community Banking: Address the issue of increasing technology costs for community banks.

Deposit Behavior: Study deposit behavior to develop a better understanding of the relative stability of different types of deposits and depositors.

Disclosure Practices: Reevaluate the FDIC’s disclosure practices (i.e., “what the agency discloses (or requires be disclosed) to the public” per Acting Chairman Hill’s ABA speech), and expand transparency in areas that do not affect safety and soundness or financial stability.

Conclusion

As Acting Chairman Hill described, the priorities are ambitious and represent a broad about-face from the FDIC under former Chairman Martin Gruenberg. Exactly how many of them are quickly implemented will depend on the ability of the FDIC staff to adapt away from current practices. One critical issue will be the response of FDIC staff members to the Trump Administration’s recently announced employee buy-out offer, as rapid implementation of an ambitious agenda in any federal government agency certainly requires full participation at the staff level.