Fed Proposes First Update to Mutual Bank Rules in 30 Years

The Federal Reserve Board asked the public on Friday to comment on a proposal that would rewrite regulations governing mutual banking organizations for the first time since 1993. Mutual banks are institutions owned by their depositors rather than by shareholders, and according to the Board, more than 90 percent of them hold less than $3 billion in total assets.

What the Fed is changing

The Board’s proposal would modernize the regulatory framework that applies to mutual banks and increase flexibility for certain mutual banks to raise capital. Specifically, the proposal would clarify which financial instruments count as regulatory capital for these institutions and reduce procedural burdens tied to the existing rules, among other updates described as comprehensive.

The Federal Reserve took over regulatory and supervisory authority for mutual banks from the Office of Thrift Supervision in 2011. The underlying rules for these institutions were first established in 1993 and, according to the Board’s announcement, have not been updated since then. The Board characterized the current rules as having “proven over time to be overly burdensome and complex.”

Why mutual banks work differently

Unlike publicly traded banks, mutual banks are owned by the people and businesses that hold deposits with them rather than by outside shareholders. That ownership structure means mutual banks do not raise capital by issuing stock in the same way a shareholder-owned bank can, which is part of why the rules for how they build and count capital matter to their ability to grow.

Vice Chair for Supervision Michelle W. Bowman said the proposal is “another important step in our work to modernize the bank regulatory framework by updating mutual bank regulations for the first time in 30 years.” She added that “the continued success of this model contributes to the institutional diversity of the U.S. banking system, which is one of the greatest strengths of our financial system,” and said the proposal “will allow mutual banks to continue to grow and more effectively serve communities across the country, while preserving their unique depositor-owned structure.”

Who this affects

The proposal is aimed directly at mutual banking organizations themselves, the majority of which are smaller institutions holding less than $3 billion in total assets. Customers of these banks are not shareholders in the traditional sense, but as depositors they have an ownership stake in the institution. Because the proposal centers on capital rules and procedural requirements for these banks, its immediate effects are institutional rather than something that changes day-to-day banking products like checking accounts or loan terms on its own.

Communities served by mutual banks, including customers who rely on them for deposit accounts and lending, have an interest in whether their institution has more flexibility to raise capital and grow, since capital rules affect a bank’s capacity to lend and expand over time.

What happens next

The proposal has been published as a Federal Register notice titled “Regulatory Modernization and Relief for Mutual Holding Companies.” Comments on the proposal are due 60 days after that Federal Register publication. The Board noted that a related statement was issued by Governor Barr, and that comments can be submitted or viewed through the Federal Reserve’s public comment system, alongside a Board memo on the proposal. Details are available in the Board’s press release at the Federal Reserve’s website.

Anyone who banks with a mutual institution, or who wants to understand how the rules for depositor-owned banks may change, can review the Federal Register notice directly and check the specific 60-day comment deadline once the notice is published, since that filing sets the exact date by which public comments must be submitted.

This is a News-lane report. It was drafted automatically from the linked primary source and published after automated checks that every figure appears in that source. It is summarised regulatory news, not evergreen guidance and not financial advice. See our AI content disclosure and disclaimer.

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