Overview
- The Federal Reserve published two notices on July 31, 2026 asking for public comment on updating long-standing rules for mutual banking organizations and on modernizing Regulation O, the rule for credit to bank insiders.
- The mutual-bank proposal would clarify which instruments count as regulatory capital and reduce procedural hurdles so certain mutual banks can raise capital more easily while keeping their depositor-owned structure.
- The Regulation O proposal would raise and index dollar-based insider-lending thresholds to economic growth, narrow the rule’s reach for passive fund holdings, and codify long-standing interpretations to simplify compliance.
- A Fed staff memo and a separate statement by Governor Michael S. Barr warned of possible costs, such as conflicts of interest, weaker accountability for dividend waivers and conversions, and uncertainty about how new capital instruments would absorb losses in stress.
- Comments are open for 60 days after the rules appear in the Federal Register, and the moves represent the first comprehensive updates to mutual-bank rules since 1993 and to Regulation O since 1979, with final decisions to follow public input.