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Federal Reserve seeks comment to modernize mutual bank rules

The proposal would update the framework for depositors-owned mutual banks, including clarifying which instruments count as regulatory capital.

Reported · Written up by our desk · Economy

The Federal Reserve Board has requested public comment on a proposal aimed at modernizing the regulations for mutual banking organizations, which are owned by depositors rather than shareholders. The Fed says more than 90 percent of these institutions have less than $3 billion in total assets.

The Board said it assumed regulatory and supervisory authority over mutual banks from the Office of Thrift Supervision in 2011. It added that the rules were first established in 1993 and have not been updated, leading to what it describes as overly burdensome and complex requirements.

In a statement, Federal Reserve Vice Chair for Supervision Michelle W. Bowman said the proposal is intended to modernize the bank regulatory framework and update mutual bank regulations for the first time in 30 years. The Fed said the proposal would allow mutual banks to grow and better serve communities while preserving their depositor-owned structure.

According to the proposal, the Fed would modernize the regulatory framework and increase flexibility for certain mutual banks to raise capital. The changes would include clarifying which instruments count as regulatory capital and reducing procedural burdens, with comments due 60 days after publication in the Federal Register.

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