Banking News Roundup – 2025: Week 2
Moves in D.C., Ameribor vs. SOFR, Blackrock vs. the FDIC, insider fraud, cybersecurity mergers, declining consumer debt, rising payment-in-kind debt, and a lot of CFPB action, in a five minute read.
Washington D.C.
Michael Barr will step down as Vice Chair for Supervision while retaining his position on the Federal Reserve’s Board of Governors. Although he had pledged to serve through the end of his term, Barr reportedly decided that a prolonged legal battle to retain his role would detract from the Fed’s work. President Trump has not yet named a successor, but attention has focused on Fed Governors Christopher Waller and Michelle Bowman, both Trump appointees. Bowman, a former community banker and Kansas banking commissioner, is seen as the likely choice. In a speech to the California Bankers Association on Thursday, she called for a “pragmatic” approach to bank regulation, aligning with her previous remarks on Fed policy.
FDIC Vice Chairman Travis Hill delivered a wide-ranging speech to the American Bar Association’s Banking Law Committee on Friday, advocating for an end to “debanking,” a reduced focus on process-based supervision, and a more progressive stance on innovation. Although Trump has yet to select a new FDIC Chair, Hill will serve as acting chair when Martin Gruenberg steps down on January 19.
The House Banking Committee solidified its leadership roles. Chairman Hill appointed Michigan’s Rep. Bill Huizenga as Vice Chair, with Florida’s Rep. Mike Haridopolos filling a newly created Whip position. New York’s Rep. Mike Lawler will take on the role of Committee Vice Chair for Communications, which is also a newly created position. Kentucky’s Rep. Andy Barr will remain Chair of the Subcommittee on Financial Institutions, while Wisconsin’s Rep. Bryan Steil will lead the Subcommittee on Digital Assets, Financial Technology, and Artificial Intelligence.
Benchmark Rates
American Financial Exchange (AFX), which runs the Ameribor benchmark interest rate, was acquired by Intercontinental Exchange (ICE). Ameribor, developed as an alternative to LIBOR, is an unsecured rate based on overnight borrowing among AFX’s 1,000 bank and nonbank members. This contrasts with SOFR, the New York Fed’s recommended LIBOR replacement, which is a secured rate reflecting overnight lending among major financial institutions. SOFR continued its recent spate of “one-off” spikes over the holidays, peaking at 4.53% after Christmas and rising again after New Year’s. ICE’s acquisition of AFX may spur further adoption of the credit-sensitive Ameribor benchmark.
Index Funds
Blackrock is refusing to capitulate to the FDIC’s recent rulemaking speed round on passivity agreements. In contrast, Vanguard came to an agreement with the FDIC in late December, acceding to provisions that go beyond the typical scope of passivity agreements. Vanguard will now be monitored by the FDIC with regard to its voting activities and its interactions with management teams. The FDIC gave Blackrock a deadline of January 10 to sign a similar agreement. Blackrock is requesting an extension to at least March 31, putting the matter into the hands of the Trump Administration. The FDIC did not specify the consequences of failing to meet the January 10 deadline in its letter.
Consumer Financial Protection Bureau (CFPB)
The CFPB continues to work at a frantic pace ahead of the January 20 inauguration. The Congressional Review Act (CRA) permits incoming U.S. presidents to repeal regulations enacted by agencies within a six-month period before the changing of the guard. If a rule is repealed under the CRA, the new administration cannot enact a rule that is “substantially the same” unless it is authorized via legislation. All of this is to say, it’s not clear which CFPB actions financial services firms will actually need to concern themselves with, but for the record, the following covers this week’s activity.
The CFPB finalized its rule removing medical debt from credit reports, and was promptly sued by two trade groups for exceeding its legal mandate. The agency also published a proposed interpretive rule subjecting various emerging payment types, including digital tokens used in video game platforms, to the Electronic Funds Transfer Act (EFTA) and Regulation E.
In response to a 2022 petition from the Consumer Bankers Association and the Center for Responsible Lending, the CFPB announced it would seek to regulate large nonbanks that make personal loans to consumers. It also responded to an October 2024 petition from Aaron Klein of the Brookings Institute, saying it would work with the Federal Reserve to reduce clearing times for check deposits.
The agency published policy statements in the Federal Register announcing it will resume accepting applications for its innovation sandbox, and setting strict guidelines for a return to issuing “no action” letters for innovative products. It also issued a Request for Information on the privacy and consumer protection practices of digital payments providers.
Financial Data Exchange, Inc. (FDX) was approved as a standard setting body under the CFPB’s recently established Open Banking regime.
The CFPB sued Vanderbilt Mortgages (owned by Berkshire Hathaway) for its lending practices related to manufactured homes, and also sued Experian for its practices in responding to consumer disputes of credit reporting errors.
Operational Risk
Bloomberg reports a rise in insider fraud, with bank employees selling customer data to scammers. While insider theft has long been a risk—given employees’ access to sensitive information—the proliferation of social media and platforms like Telegram has increased opportunities to monetize looted data. If it’s been a while since you’ve reviewed your defenses against insider theft, this is a good moment to revisit them.
The Wall Street Journal reports that merger activity is expected to increase for cybersecurity firms in 2025. The upside: your existing platforms may pick up a lot of attractive new features. The downside: your vendor management function should be ever vigilant about tech dependency and in performing reviews of add-on services.
Credit
U.S. consumer debt decreased by $7.5 billion in November, following a $17.3 billion gain in October. The drop, driven by credit card paydowns, surprised economists, who had predicted a $10.5 billion increase according to a survey conducted by Bloomberg.
The International Monetary Fund (IMF) has its eye on payment-in-kind (PIK) debt, and its growing use in the financial markets. Payment-in-kind financing permits borrowers to pay current interest with more debt rather than cash. Bloomberg reports that the IMF is concerned about extend-and-pretend, and whether stress is building up in the private credit markets.
Transactions
Hawaiian Electric Industries (HEI) sold a 90.1% stake in $9.3 billion-asset American Savings Bank to investors for $405 million in cash.
Pennsylvania’s CNB Financial Corp. will acquire in-state ESSA Bancorp in a $214 million all-stock deal, bringing CNB’s assets to $8 billion.
Depositor-owned Massachusetts banks Reading Cooperative Bank and Wakefield Cooperative Bank plan to merge, combining to hold $1.2 billion in assets. Terms were not disclosed.
Michigan’s Zeal Credit Union agreed to acquire in-state Gogebic Range Bank in an all cash deal that is expected to bring Zeal’s assets up to $975 million. The price was not disclosed.
Atlanta Postal Credit Union and Affinity Bancshares, Inc. terminated their purchase agreement following discussions with regulators about the combination.
Florida-based Amerant Bancorp sold $71.4 million in mortgages to Temple View Capital Funding and TVC Funding VII at a $12.6 million loss.