May 2026 Financial Reporting, Governance, and Risk Management
Message from Sydney Garmong, partner, national office
As we move closer to the midpoint of 2026, regulators continue proving that “spring slowdown” is apparently not part of the federal vocabulary. This month brought a steady flow of proposals, finalized rules, and policy shifts from the federal banking and credit union regulators and the Securities and Exchange Commission (SEC) – with themes of modernization, simplification, and regulatory recalibration running throughout. And to round out the activities, the Financial Accounting Standards Board (FASB) held a current expected credit loss (CECL) model roundtable.
From the federal banking regulators, activity centered on easing burden while maintaining supervisory focus. The agencies finalized changes to the community bank leverage ratio framework and revised model risk management guidance. The overall tone continues to favor more tailored, risk-based supervision and reduced complexity – though, naturally, achieving “simplicity” often requires several hundred pages of guidance. Joining the collective effort, the National Credit Union Administration announced the 11th round of proposed changes under its deregulation project.
Just when we thought we were done, late yesterday yet another proposal, “Uniform Financial Institutions Rating System,” was issued – this one from the Federal Financial Institutions Examination Council requesting public comment on proposed revisions to the Uniform Financial Institutions Rating System, commonly referred to as the CAMELS rating system. Comments will be due 90 days after publication in the Federal Register.
As a reminder, the three capital proposals – two from the Federal Deposit Insurance Corp., the Federal Reserve Board of Governors (Fed), and the Office of the Comptroller of the Currency and one from the Fed – issued on March 19, 2026, remain open for comment through June 18, 2026, continuing the broader discussion around recalibrating capital requirements and risk sensitivity across the banking system.
- The first proposed rule: “Category I and II Banking Organizations, Banking Organizations With Significant Trading Activity, and Optional Adoption for Other Banking Organizations”
- The second proposed rule: “Regulatory Capital and Standardized Approach for Risk-Weighted Assets”
- A third proposal, from the Fed: “Regulatory Capital Rule (Regulation Q): Risk-Based Capital Surcharges for Global Systemically Important Bank Holding Companies; Systemic Risk Report (FR Y-15)”
At the FASB, the spotlight turned to CECL. The post-implementation review roundtable generated discussion of whether the benefits of forward-looking loss estimation justify the operational and compliance burden, particularly for community institutions. Discussion included strong commentary from Fed Vice Chair for Supervision Michelle Bowman. She said, “Community banks would be better served by returning to the incurred loss standard.” If you are looking for reading material or to fill three hours, the 40 pages of meeting materials are available on the FASB website, and video of the meeting can be found on YouTube.
Meanwhile, the SEC continues its goal to modernize public company reporting and capital formation rules. Earlier this month, the SEC proposed optional semiannual reporting. Yesterday, the SEC issued two more proposals: filer status reforms (and recalibrating and moving from five classifications to two – large accelerated filer and nonaccelerated filer), and registered offering modernization. If you want the cut-to-the-chase versions, check out the fact sheets “Registered Offering Reform” and “Enhancing the Public Company Reporting Framework.” If you are looking for some no-nonsense commentary, read Commissioner Hester Peirce’s statement, “Headache Medicine: Statement on Proposing Releases for Registered Offering Reform and Enhancement of Emerging Growth Company Accommodations and Simplification of Filer Status for Reporting Companies.”
As always, we appreciate the opportunity to keep you informed on the developments shaping the financial services industry, and we’ll continue monitoring the proposals, pronouncements, and acronyms.
We wish you a safe and enjoyable Memorial Day weekend. For my fellow Hoosiers and all racing enthusiasts, I hope you enjoy the Indy 500, scheduled for Sunday.
Financial Institutions Executive Briefing
Get updates on accounting, governance, risk management, and compliance issues.
From the federal financial institution regulators
Federal banking agencies finalize changes to the CBLR
On April 23, 2026, the Federal Deposit Insurance Corp. (FDIC), the Federal Reserve Board of Governors (Fed), and the Office of the Comptroller of the Currency (OCC) finalized a rule modifying the community bank leverage ratio (CBLR) framework. The rule lowers the CBLR requirement from 9% to 8% and extends the grace period for a qualifying community banking organization that temporarily falls out of compliance from two consecutive quarters to four consecutive quarters, subject to a limit of eight quarters in the previous five-year period. The changes are intended to provide community banks greater flexibility to opt in to a simpler capital framework and reduce regulatory burden while maintaining safety and soundness.
The final rule, “Regulatory Capital Rule: Community Bank Leverage Ratio Framework,” was published in the Federal Register on April 29, 2026, and is effective July 1, 2026.
For additional information, see the Crowe article “CBLR Rule Lowers Required Community Bank Leverage Ratio.”
Federal banking agencies revise model risk management guidance
On April 17, 2026, the FDIC, the Fed, and the OCC revised interagency guidance on model risk management, replacing the agencies’ prior 2011 model risk framework. The revised guidance retains the core focus on model development, use, validation, monitoring, governance, and controls but shifts toward a more tailored, risk-based approach based on a banking organization’s size, complexity, and model risk profile. It also clarifies that the guidance is expected to be most relevant to banking organizations with more than $30 billion in total assets and that noncompliance with the guidance alone will not result in supervisory criticism.
Compared with prior guidance, the update narrows the definition of “model” to complex quantitative methods, systems, or approaches that apply statistical, economic, or financial theories, and it excludes simple calculations and deterministic rule-based processes. In addition, the guidance does not establish a new AI-specific framework. It notes that generative AI and agentic AI models are outside the scope of the guidance given that they are evolving rapidly. The agencies stated that they plan to issue a future request for information on model risk management and banks’ use of AI, including generative AI, agentic AI, and AI-based models.
The guidance, “Supervisory Guidance on Model Risk Management,” was issued as FDIC FIL-15-2026, OCC Bulletin 2026-13, and Federal Reserve SR 26-2, and it rescinds or supersedes prior model risk guidance.
Fed highlights risk to U.S. financial stability
On May 8, 2026, the Fed released its May 2026 Financial Stability Report, which reviews vulnerabilities in asset valuations, borrowing, financial-sector leverage, and funding markets. The report highlights elevated asset valuations, high hedge fund leverage, and funding risks tied in part to private credit and redemption pressures at certain business development companies. It characterizes business and household debt vulnerabilities as moderate and notes that the banking system remains resilient, with strong capital and liquidity positions. The report also identifies geopolitical risks, oil shocks, AI, private credit, and persistent inflation as the most frequently cited near-term risks.
Compared with prior reports, the May 2026 report shows a shift in market contacts’ concerns away from policy uncertainty and global trade risks toward geopolitical risks and oil shock risk. AI also continued to rise as a cited risk, increasing from 9% of contacts in spring 2025 to 30% in fall 2025 and 50% in spring 2026.
OCC highlights key risks in the banking system
On May 7, 2026, the OCC released its Semiannual Risk Perspective for spring 2026, identifying key risks facing the federal banking system. The report notes that bank earnings improved in 2025 and that balance sheets remain strong, while highlighting ongoing credit risks in certain commercial real estate and private credit segments, cyberthreats and fraud, sanctions and Bank Secrecy Act/anti-money laundering compliance risks, and risks and opportunities related to AI.
FDIC highlights bank funding, interest rate, and credit risks
On April 22, 2026, the FDIC published its 2026 Risk Review, an annual report summarizing economic and market conditions affecting the banking industry. The report highlights generally steady bank performance in 2025, strong net income, higher loan growth, modestly improved net interest margins, and lower but still elevated unrealized securities losses. It also notes that credit risks generally were contained, with continued weakness in certain commercial real estate and consumer loan portfolios.
OCC issues interim final actions on bank interchange fees and Illinois preemption
On April 24, 2026, the OCC issued an interim final rule and interim final order clarifying national bank authority to charge noninterest fees, including interchange fees from credit and debit card operations, even when those fees are set by or in consultation with third parties. The order concludes that federal law preempts the Illinois Interchange Fee Prohibition Act as applied to national banks and federal savings associations.
The interim final rule, “National Bank Non-Interest Charges and Fees,” was published in the Federal Register on April 29, 2026, and the interim final order, “Order Preempting the Illinois Interchange Fee Prohibition Act,” was published the same day. Both are effective June 30, 2026; comments are due May 29, 2026. The actions follow the district court’s Feb. 10, 2026, decision in Illinois Bankers Association v. Raoul, and related appeals are pending in the 7th Circuit, with oral arguments set for May 13, 2026.
OCC proposes streamlining select banking regulations
On April 24, 2026, the OCC issued a notice of proposed rulemaking to amend or rescind certain regulations under the executive order focused on government efficiency. The proposal would revise public welfare investment examples, rescind a collateralized loan obligation-related regulatory option, and remove certain nondiscrimination requirements for federal savings associations that the OCC views as duplicative or lacking clear statutory authority.
The proposed rule, “Streamlining Regulations Concerning Public Welfare Investments, Open Market Collateralized Loan Obligations, and Federal Savings Association Nondiscrimination Requirements,” was published in the Federal Register on April 27, 2026. Comments are due May 27, 2026.
Federal banking agencies update host state loan-to-deposit ratios
On May 1, 2026, the OCC, the FDIC, and the Fed issued updated host state loan-to-deposit ratios used to evaluate compliance with interstate branching requirements. The ratios compare loans to deposits within each state and might be relevant for institutions with interstate operations, including those considering branching or acquisition activity. The updated ratios replace the prior ratios issued in May 2025.
NCUA announces new round of deregulation proposals
On May 6, 2026, the National Credit Union Administration (NCUA) announced the 11th round of proposed regulatory changes under its deregulation project. The proposals would raise the major-assets prohibition thresholds under the Depository Institution Management Interlocks Act to $10 billion, remove a related presumption for certain management interlocks, and streamline share insurance regulations by removing provisions that primarily cross-reference other NCUA rules.
The proposed rules, “Thresholds Increase for the Major Assets Prohibition of the Depository Institution Management Interlocks Act Rule” and “Requirements for Insurance,” were published in the Federal Register on May 7, 2026. Comments are due July 6, 2026.
From the Financial Accounting Standards Board (FASB)
FASB hosts public roundtable on credit losses
On May 12, 2026, the FASB held a post-implementation review roundtable on the current expected credit loss (CECL) model to gather feedback from preparers, regulators, auditors, investors, and industry participants regarding the standard’s benefits, costs, operational challenges, and future direction.
Discussion included strong commentary from Fed Vice Chair for Supervision Michelle Bowman. She said, “Community banks would be better served by returning to the incurred loss standard.”
Participants generally acknowledged that the CECL standard improved forward-looking reserve analysis and increased rigor in credit loss estimation, but many questioned whether those benefits justify the significant implementation, audit, modeling, documentation, and ongoing compliance costs – especially for community and smaller financial institutions.
The 40 pages of meeting materials are available on the FASB website, and video of the meeting can be found on YouTube.
FASB issues guidance on paid-in-kind dividends on equity-classified preferred stock
On April 23, 2026, the FASB issued Accounting Standards Update (ASU) 2026-01, “Equity (Topic 505) – Initial Measurement of Paid-in-Kind Dividends on Equity-Classified Preferred Stock,” which provides authoritative guidance on how an issuer should initially measure paid-in-kind dividends on equity-classified preferred stock. As banks typically pay cash dividends on preferred stock, this standard might have limited applicability.
The standard is effective for all entities for annual reporting periods beginning after Dec. 15, 2026, and interim reporting periods within those annual reporting periods, with early adoption permitted.
FASB removes statement of cash flows targeted improvements for financial institutions project from technical agenda
At its April 22, 2026, board meeting, the FASB discussed feedback received on its statement of cash flows targeted improvements project and decided to remove the project from its technical agenda. The board also directed the staff to perform research on disclosures that could replace the statement of cash flows for certain entities, signaling that the topic might continue to be evaluated through a narrower disclosure-focused lens.
FASB adds project on fair value hedging – portfolio layer method for liabilities
At its April 22, 2026, board meeting, the FASB added a project to its technical agenda to extend the portfolio layer method to liabilities. The board indicated that the project is intended to better align financial reporting with entities’ risk management activities and represents another step in the FASB’s broader hedge accounting agenda. The project could be particularly relevant to banks that manage interest rate risk on portfolios of liabilities, as it might eventually provide a hedge accounting approach that better aligns with common asset-liability management practices.
From the Securities and Exchange Commission (SEC)
SEC proposes filer status and emerging growth company accommodation reforms
On May 19, 2026, the SEC proposed amendments, “Enhancement of Emerging Growth Company Accommodations and Simplification of Filer Status for Reporting Companies,” which would simplify public company filer status categories and extend disclosure scaling and other accommodations to a broader range of public companies. Under the proposal, the number of categories would move from five to two (large accelerated and nonaccelerated) and be recalibrated. The threshold for a public company to become a large accelerated filer would increase from $700 million to $2 billion, and a company would not become a large accelerated filer for at least 60 months following its initial public offering regardless of public float. All other public companies would be categorized as nonaccelerated filers and generally would benefit from disclosure scaling and other accommodations, including exemption from the requirement to obtain an auditor’s attestation on internal control over financial reporting. The proposal also would establish a subcategory of small nonaccelerated filers with additional time to file annual and quarterly reports.
SEC proposes registered offering reforms
On May 19, 2026, the SEC separately proposed amendments to modernize registered offerings. The proposal would revise Form S-3 eligibility requirements to enable more public companies, regardless of public float, to conduct shelf offerings while also extending certain registration and offering communication accommodations that currently are limited to “well-known seasoned issuers” to a broader range of public companies. In addition, the amendments would:
- Broaden accommodations permitting broker-dealers participating in registered offerings to publish issuer-specific research reports
- Preempt state securities law registration and qualification requirements for all registered offerings
- Extend certain Form N-2 shelf registration and communication accommodations to a broader group of business development companies and registered closed-end funds
- Expand access to broad-based advertising for certain nonvariable annuity insurance products
- Expand the ability to incorporate information by reference into Form S-1 registration statements
SEC proposes optional semiannual reporting
On May 5, 2026, the SEC proposed amendments that would allow public companies subject to the Securities Exchange Act of 1934 to elect semiannual reporting on new Form 10-S instead of quarterly reporting on Form 10-Q. Companies choosing the semiannual option would file one semiannual report and one annual report each fiscal year, with the Form 10-S due 40 or 45 days after the end of the first semiannual period, depending on filer status.
Chair Paul Atkins issued a statement on the proposal, describing it as part of his “Make IPOs Great Again” agenda and stating that it is intended to provide companies greater flexibility to evaluate reporting costs, management time, investor expectations, cost of capital, business stage, business model, and alternative disclosure avenues. Commissioner Mark Uyeda characterized the proposal as a focus on flexibility, stating that a reporting framework developed nearly 75 years ago should not be presumed to serve all companies optimally today. Commissioner Hester Peirce voiced support for the proposal but questioned whether the commission should instead focus on reducing the burden of Form 10-Q reporting itself rather than changing the cadence of reporting.
Comments on the proposal are due July 6, 2026.
For more information, please see the Crowe article “Form 10-S: SEC Proposes Optional Semiannual Reporting.”
SEC chair discusses AI and onchain finance
On May 8, 2026, Atkins delivered remarks addressing artificial intelligence, agentic finance, and onchain financial markets. He said firms remain responsible for the outcomes of the tools they deploy and for informing investors how those tools are used, while also stating that the SEC will not dictate which models firms must use or make today’s technology the standard for tomorrow.
He also noted that while AI has the potential to improve market efficiency and broaden participation in the financial markets, it might create vulnerabilities when models are opaque, errors propagate across widely adopted tools, or malicious actors gain access to the technology. For onchain markets, he identified potential areas for additional clarity, including onchain trading systems, broker and dealer definitions, clearing agency treatment for onchain clearing and settlement, and crypto vaults.
SEC officials discuss public markets and the IPO process
On April 7, 2026, Atkins delivered remarks on public markets and described three pillars of his plan to “make IPOs great again”: modernizing, rationalizing, and streamlining disclosure requirements; focusing on state regulation of corporate governance; and allowing public companies litigation alternatives while preserving an avenue for meritorious shareholder claims. He said materiality should be the SEC’s North Star and that the disclosure regime should elicit information material to investors while allowing market forces to drive additional disclosure.
On April 28, 2026, Peirce delivered remarks titled “Getting All Your Ducks in a Row to IPO” before the Small Business Capital Formation Advisory Committee, describing the IPO process as costly, time-consuming, and particularly burdensome for smaller companies. Peirce noted that SEC staff is taking a fresh look at Regulation S-K and asked the committee to consider questions involving underwriter engagement, management time, IPO timing, deal execution risk, and ways to shorten the IPO process without losing the discipline it provides.
SEC launches ‘Material Matters’ podcast
On April 16, 2026, the SEC announced the launch of “Material Matters With SEC Chairman Paul Atkins,” a podcast intended to provide insights on the agency’s policy and rulemaking agenda. The first episode includes interviews with Uyeda and Peirce, including discussion of their experiences at the SEC and the priorities at the agency in 2026.
CorpFin updates C&DIs
On May 4, 2026, the Division of Corporation Finance (CorpFin) updated its compliance and disclosure interpretations (C&DIs). The update added new Question 118.01 to the Securities Act Section 3(a)(2) interpretations addressing pooled employer plans, and new Question 126.45 to the Securities Act Forms interpretations for Form S-8 addressing registration of employer securities and plan interests.
SEC staff addresses crypto asset securities user interfaces
On April 13, 2026, the SEC Division of Trading and Markets staff issued a statement on broker-dealer registration requirements for certain user interfaces used to prepare user-initiated crypto asset securities transactions through self-custodial wallets. The staff said it would not object to a covered user interface provider operating without broker-dealer registration under specified circumstances.
Peirce welcomed the staff statement but made remarks that she favors a more permanent regulatory approach addressing the broker definition in light of current market circumstances.
SEC and CFTC propose Form PF amendments
On April 20, 2026, the SEC and Commodity Futures Trading Commission (CFTC) jointly proposed amendments to Form PF, the confidential reporting form for certain SEC-registered private fund advisers. The proposal would raise the Form PF filing threshold from $150 million to $1 billion in private fund assets under management and raise the “large” hedge fund adviser reporting threshold from $1.5 billion to $10 billion in hedge fund assets under management.
The agencies said the proposal would continue to collect information on more than 90% of private fund gross assets, require detailed exposure information for funds managed by large hedge fund managers, and enable a method to identify funds active in the private credit market. In separate statements, Peirce, in remarks titled “‘PF’ Stands for Please Fix: Statement on the Proposed Amendments to Form PF,” stated that Form PF has expanded beyond its original purpose of assisting the Financial Stability Oversight Council in monitoring systemic risk, while Uyeda stated that the proposal would better focus reporting obligations on the largest and most systemically significant advisers and periodically reassess reporting thresholds over time.
Comments on the proposal are due June 23, 2026.
SEC provides Treasury clearing implementation update
On April 20, 2026, Uyeda issued an update on the SEC’s work toward implementation of the U.S. Department of the Treasury Clearing Rule. He said the commission published for comment a request from the Securities Industry and Financial Markets Association for targeted changes to the interaffiliate exemption and reopened comment on a request from the Institute of International Bankers addressing the extraterritorial application of the trade submission requirement. Comments are due May 29, 2026.
Uyeda said implementation should preserve Treasury market functioning while enhancing resilience and noted market participant questions involving interaffiliate repo activity, time zone differences, the absence of 24-hour clearing, and enforceability of netting arrangements.
From the Public Company Accounting Oversight Board (PCAOB)
PCAOB shares perspectives from conversations with audit committee chairs
On April 27, 2026, the PCAOB released a staff Spotlight, “2025 Conversations With Audit Committee Chairs,” summarizing insights gathered from discussions with more than 250 audit committee chairs at U.S. public companies. The publication presents high-level observations and takeaways from those conversations and adds to the PCAOB’s recent efforts to engage more directly with audit committee stakeholders.
PCAOB updates standard-setting, rulemaking, and research projects
On May 5, 2026, the PCAOB posted updates to its standard-setting, rulemaking, and research projects while its strategic planning process remains underway. According to the board, the updated projects page describes staff activities being performed in the interim period while comments on the PCAOB’s strategic priorities are received and analyzed before a new agenda is issued.
From the Center for Audit Quality (CAQ)
CAQ submits comment letter on Regulation S-K and Regulation S-X
In its April 2026 Audit Insider, the CAQ highlighted its comment letter submitted to the SEC in response to the commission’s review of Regulation S-K and Regulation S-X. In the letter, the CAQ expressed support for a more principles-based, materiality-driven disclosure framework and called for the elimination of overlapping or duplicative disclosure requirements. The CAQ also urged the SEC to modernize and simplify existing Regulation S-K requirements and to update Regulation S-X to reflect how financial reporting has evolved since the rules were last comprehensively reviewed.
CAQ submits supplemental letter on QC 1000 implementation experience and costs
Also in its April 2026 Audit Insider, the CAQ highlighted a supplemental letter it had submitted to the PCAOB on implementation experience and costs related to QC 1000, the board’s quality control standard. The letter provides additional insights based on firms’ early implementation experience and includes cost information drawn from certain member firms to help illustrate the potential economic impact of the standard. The CAQ also reiterated its support for strong quality control systems while continuing to emphasize the importance of scalability and alignment with international standards.
CAQ announces leadership transition
On April 16, 2026, the CAQ announced that Julie Bell Lindsay will step down following seven years as CEO. The CAQ Governing Board appointed Mark Koziel, CEO of the AICPA, to serve as temporary interim CEO effective immediately, with Lindsay supporting the transition through the end of April.
FASB materials reprinted with permission. Copyright 2026 by Financial Accounting Foundation, Norwalk, Connecticut. Copyright 1974-1980 by American Institute of Certified Public Accountants.
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FDIC, Fed, OCC finalize CBLR rule & revise model risk management guidance; FASB hosts CECL roundtable; SEC proposes filer status reforms; and more.
Federal banking agencies request comment on proposals to revise capital framework, federal agencies issue proposals to implement GENIUS Act, and more.
FDIC and NCUA publish Q4 25 results, banking agencies focus on regulatory burden reduction, SEC and CFTC announce MOU on coordination, and more.
FDIC, Fed, OCC finalize CBLR rule & revise model risk management guidance; FASB hosts CECL roundtable; SEC proposes filer status reforms; and more.
Federal banking agencies request comment on proposals to revise capital framework, federal agencies issue proposals to implement GENIUS Act, and more.
FDIC and NCUA publish Q4 25 results, banking agencies focus on regulatory burden reduction, SEC and CFTC announce MOU on coordination, and more.