As the year winds down, the industry isn’t slowing. The Fed is signaling sweeping changes to bank oversight, the CFPB is instructing examiners to take a humility oath, and the penny shortage is prompting real operational strain for banks and merchants alike. Alongside this, institutions are accelerating into AI, digital assets, tokenized deposits, and navigating major developments in Banking as a Service oversight.
A new internal memo from the Federal Reserve signals one of the biggest rethinks of bank oversight in over a decade. The memo proposes moving away from examinations that devote excessive attention to processes, procedures, and documentation that do not pose a material risk. Instead, Fed examiners are instructed to lean more heavily on the work of state and federal banking supervisors and work more closely with state banking agencies to assess broader patterns that can create institutional vulnerabilities.
At the same time, the Consumer Financial Protection Bureau (CFPB) issued a surprising directive: bank examiners must take a “humility oath.” The pledge instructs supervisors to acknowledge uncertainty, avoid overconfidence in interpretations, and adopt a more collaborative posture during exams.
For community banks and credit unions, these changes could bring a more focused, risk-based exam process that reduces low-impact findings and decreases the burden of documentation-heavy reviews. Institutions with strong governance, transparent reporting, and disciplined risk practices may benefit from clearer priorities and a more predictable supervisory dialogue.
At the same time, the planned 30 percent reduction in the Fed’s supervision and regulation staff raises concerns that oversight could become less forward-looking and slower to respond, a risk highlighted by former Vice Chair Michael Barr. With fewer examiners and potentially longer feedback cycles, community institutions may need to bolster internal controls, enhance board-level risk reporting, and maintain year-round exam readiness. In a period of leaner supervision, proactive governance and strong self-assessment processes will be essential to navigating a more variable regulatory environment.
Read our Co-Founder and Chief AML Officer Sarah Beth Felix's take on some recent changes in regulatory oversight and impact on community FIs here.
The U.S. Mint has stopped bulk production of pennies, and the impact is rippling through banks and retailers as supplies dry up and federal guidance remains absent. After President Trump called for an end to the “wasteful” one-cent coin, officials marked what they described as the final new penny off the production line on November 12.
Although an estimated 300 billion pennies exist in the economy, circulation is breaking down. The Federal Reserve has increasingly cut off penny service at its coin distribution terminals, the facilities that supply banks. In early October, 41 of 165 terminals had stopped handling pennies entirely; by late November, that number had climbed to 102, with only seven more still accepting deposits but not distributing them. Banks and retailers say this is turning routine tasks like making change, cashing checks to the cent, and managing SNAP-related pricing into daily challenges. Trade groups are urging the Fed and Treasury to reopen terminals, clarify rounding practices, and educate the public.
Community banks and credit unions are on the front line of this transition. When coin terminals stop supplying and, in many cases, stop accepting penny deposits, local institutions lose the ability to recycle coins efficiently and are forced into costly workarounds, including shipping pennies long distances to the few remaining terminals that will take them. At the same time, they must improvise at the teller line while trying to stay on the right side of consumer-protection rules.
With retailers also facing legal and operational risk around how they round cash transactions, the lack of federal guidance is creating uncertainty for both banks and their business customers. Community institutions may need to communicate proactively with merchants, document rounding approaches carefully, and monitor any future Fed or Treasury instructions so they can adjust policies quickly and protect customers, especially in cash-heavy communities.
A wave of developments this month shows regulated financial institutions moving deeper into digital assets with new charters, new products, and new regulatory frameworks emerging in parallel.
Key updates:
SoFi relaunched its crypto trading service and is now the first and only nationally chartered bank to provide crypto trading directly to retail customers. The bank says it rebuilt the platform to meet heightened regulatory expectations and support future expansion into additional digital-asset services.
Nebraska approved Telcoin Bank to launch as a state-chartered, fully regulated digital-asset bank. The charter allows Telcoin to combine traditional banking oversight with blockchain-based services, including issuing the first U.S. bank-issued stablecoin. This places Telcoin alongside Anchorage Digital Bank and Erebor Bank in the emerging category of state and OCC-supervised crypto-native banks.
JPMorgan officially deployed its digital deposit token, JPMD, on Coinbase’s Base network, marking the first time the bank has rolled out a native payments product on a public blockchain. The token is designed for institutional transfers and settlement.
The FDIC announced it will issue new regulatory guidance on tokenized deposits and intends to introduce a formal application process for stablecoin issuers by the end of 2025. Regulators signaled that tokenized bank liabilities will be treated differently from privately issued stablecoins.
Digital assets continue moving from the periphery into the regulated banking system, and banks of all sizes may soon face competitive and strategic questions. SoFi’s chartered entry into retail crypto trading could reset consumer expectations about where digital-asset services “should” live. JPMorgan’s move onto a public blockchain signals growing institutional comfort with using open networks for real-world payments. And the FDIC’s coming guidance and application process for tokenized deposits could establish the first clear regulatory playbook for banks exploring digital-asset liabilities. However, it’s worth noting that most newly chartered digital-asset banks still do not have Fed master accounts, meaning they depend on partner banks for wires and ACH. Even as the industry experiments with tokenized rails, access to the core payments system continues to hinge on traditional payments infrastructure.
For community banks and credit unions, this doesn’t require immediate action, but it does raise questions about future payment rails and potential opportunities around stablecoin settlement, tokenized deposits, or fintech partnerships. State regulators’ willingness to license digital-asset banks and formalize supervisory expectations suggests this space is moving toward normalization rather than experimentation. Institutions may want to monitor developments closely as digital-asset banking shifts from edge cases to regulated infrastructure.
Read more about how community FIs can start to evaluate digital asset opportunities safely:
Large banks are rapidly expanding their use of artificial intelligence as operational demands grow. Institutions like BNY Mellon and Citi are already utilizing AI agents, software systems that can reason and perform tasks autonomously. A new Capgemini financial services survey shows that customer service is the most common use for agentic AI, and three in five use it for customer onboarding and loan processing, while two-thirds use AI to detect fraud. However, only 10 percent of financial services companies have fully implemented agentic AI at scale.
Meanwhile, a McKinsey analysis estimates that AI could reduce banking-industry costs by up to 20 percent in the near term, driven by automation in customer service, fraud detection, payments, and back-office operations. But the firm emphasizes a critical caveat: those savings won’t last long. As more banks adopt AI, competitive pressures will push institutions to reinvest the gains into new technology, product improvements, and customer experience, narrowing the cost advantage over time.
For community banks and credit unions, the headline isn’t just that AI could cut costs; it’s that the competitive landscape may shift faster than expected. Large banks are already deploying enterprise-scale AI and formalizing the governance structures around it. Their short-term savings may translate into improved service quality, faster processing, and better analytics, widening the efficiency gap until community FIs adopt their own targeted AI tools.
McKinsey’s analysis is especially relevant for smaller institutions: AI savings are temporary, but AI-enabled expectations are permanent. As big banks reinvest their gains into new capabilities, community banks may feel pressure to modernize select workflows to maintain both speed and service quality.
A new government report warns that U.S. cybersecurity progress is losing momentum, even as global cyber threats continue to accelerate. The analysis shows that key sectors, including financial services, are moving too slowly to modernize critical systems, implement advanced monitoring tools, and adapt to increasingly sophisticated attack techniques. The report also notes that many organizations have not meaningfully improved their ability to detect intrusions quickly or contain breaches once they occur.
The findings come amid rising ransomware activity, increased attacks on third-party vendors, and a wave of government agencies reporting weakened cybersecurity postures. Industry observers say the slowdown reflects a combination of outdated infrastructure, staffing shortages, and tightening IT budgets at a time when threat actors are more coordinated and well-resourced than ever.
Community banks and credit unions remain attractive targets for cyber attackers, especially when industry-wide progress stalls. Smaller institutions often face resource constraints that make it challenging to keep pace with new threat vectors or maintain round-the-clock monitoring. For community institutions preparing 2026 budgets, this is a reminder that cybersecurity investments, particularly in detection, response, and vendor management, may face heightened scrutiny in the months ahead.
Read more about how to modernize data exchange in banking:
Two major developments this month highlight the regulatory expectations shaping the Banking as a Service (BaaS) sector. A federal judge dismissed Synapse’s bankruptcy case after determining that the failed fintech could not meet the obligations of a Chapter 11 liquidation. The ruling clears the way for the CFPB to begin compensating victims affected by missing or frozen funds, a rare step that underscores how seriously regulators are treating consumer harm tied to fintech–bank partnerships.
In a separate development, Blue Ridge Bank announced it has exited a high-profile consent order linked to shortcomings in its fintech oversight program. The bank said it strengthened its risk-management framework, enhanced third-party monitoring, and improved internal controls, which were steps regulators required before lifting the order. The resolution marks one of the first major examples of a BaaS-heavy bank returning to normal operations after significant regulatory remediation.
Regulators are tightening expectations around fintech partnerships, but they are also outlining a path back to compliance for institutions that invest in strong oversight. Blue Ridge’s successful exit out of the consent order shows that regulators are not trying to shut down BaaS; They want banks to run it with bank-grade controls. For smaller institutions exploring embedded finance, these cases reinforce the need for strong vendor management, clear contractual roles, real-time visibility into fintech activity, and well-documented reconciliation and compliance frameworks. As supervision intensifies, community institutions that build disciplined, exam-ready partnerships will be better positioned to compete in a more mature BaaS industry.
For more about community banking and BaaS, read our profile of Dave Mayo, CEO of FedFis and co-founder of Bankers Helping Bankers: