Community Banking News Update - February 2025

This month's major stories in community banking and their impact 📣

Welcome to the latest edition of Community Banking News Update, your monthly roundup of the top news that affects community banks and credit unions and why they matter. Read last month’s issue here.

This month we cover a flurry of leadership changes in top federal government banking posts, the dismissal of CFPB director Rohit Chopra, and a major leadership change at Fiserv. Other important news developments include a push to revive new bank formation, the Federal Reserve pause on rate cuts, TD Bank’s new Global Head of Financial Crime Risk Management, and the FDIC’s lawsuit against former Silicon Valley Bank executives for gross negligence.  How does all of this affect community financial institutions? Read on to learn more.

1. Push to Revive De Novo Bank Formation Gains Momentum in Congress

Congress is making another attempt to reinvigorate de novo bank formation, as Representative Andy Barr prepares to reintroduce a bill aimed at streamlining the process for new community banks. The legislation, backed by the American Bankers Association (ABA), seeks to address long-standing regulatory hurdles that have led to a sharp decline in new bank charters. The bill would ease capital requirements, shorten approval timelines, and provide greater transparency in the application process, with the goal of fostering more competition and expanding financial services in underserved areas. Barr and industry advocates argue that revitalizing de novo bank formation is critical to ensuring a diverse and competitive banking landscape, particularly as community banks face increasing pressure from consolidation and regulatory burdens.

Meanwhile, Acting FDIC chair Travis Hill signaled in a virtual Q&A at the Acquire or Be Acquired Conference that creative solutions need to be applied to encourage more new bank charters to enter the system.  

Why This Matters to Community Banks and Credit Unions:

The decline in new bank formations has limited competition and reduced the number of community-focused institutions that serve local businesses and consumers. If passed, this bill could create a more favorable environment for new community bank formation.

Acceleron is actively navigating the de novo bank formation process as it transitions into a fully licensed correspondent bank. As the first fully digital correspondent bank, Acceleron Bank will help U.S. community banks streamline international wire automation and generate non-interest income while providing correspondent banking services. This legislative effort could create a more favorable environment for innovative banking models like Acceleron's, fostering the growth of specialized financial services that address the evolving needs of community banks.

Read about Acceleron's de novo bank formation process →

2. A Wave of Leadership Changes Reshapes Financial Services Oversight

A series of key leadership changes is set to shape financial services regulation in 2025, with new figures taking prominent roles in the Treasury Department, the FDIC, and the House Financial Services Committee:

• Scott Bessent Confirmed as Treasury Secretary for Financial Institutions – Bessent, confirmed with bipartisan support, has been an outspoken critic of what he calls excessive regulation, arguing that it has "perhaps overcapitalized" the sector, particularly for smaller banks. In his confirmation hearing, Bessent warned that stringent regulatory policies have consolidated power among the largest banks, allowing the shadow banking system to grow at the expense of community and regional banks.
• Travis Hill Named Acting FDIC Chair – Hill has signaled a shift in bank supervision, advocating for regulators to focus on core financial risks rather than “process-related issues that have little bearing on a bank’s financial condition or solvency.” He argued that excessive focus on procedural details has become “a major distraction” for both banks and examiners. Hill believes that this approach has led to crushing compliance costs, particularly for community banks.
• French Hill to Chair the House Financial Services Committee – A former community bank CEO, Hill has experienced how federal regulations impact real-world banking, particularly for smaller institutions. Hill has outlined an agenda focused on regulatory fairness, promoting industry health, and improving capital access. 

Why This Matters to Community Banks and Credit Unions:

These leadership changes could signal a shift toward reduced regulatory burdens for community banks and credit unions. With Bessent advocating for regulatory reform, Travis Hill pushing for streamlined supervision, and French Hill focusing on regulatory fairness and capital access, smaller financial institutions may see relief from complex compliance requirements. Hill’s background as a community bank CEO suggests he understands the operational challenges of smaller institutions and may prioritize policies that ease compliance costs and improve access to credit for local businesses. However, while deregulation could provide flexibility, it also introduces new risks, requiring community banks to maintain strong risk management and governance to navigate a changing regulatory landscape effectively. Community banks and credit unions should closely monitor these developments, as they could affect compliance requirements, lending standards, and access to capital in the coming months.

3. CFPB Director Rohit Chopra Dismissed

President Donald Trump has dismissed Rohit Chopra from his position as Director of the Consumer Financial Protection Bureau (CFPB), a role he had held since 2021. Chopra's tenure was marked by aggressive initiatives to enhance consumer protection including capping overdraft fees and removing medical debt from credit reports. The agency also settled $3.7 billion with Wells Fargo over abusive customer practices, as well as enforcement actions against other big banks. However, his approach drew criticism from those in the financial industry who viewed some measures as regulatory overreach. Scott Bessent, the recently confirmed Treasury Secretary, will serve as the acting CFPB director until a full-time director can be nominated and confirmed.

Why This Matters to Community Banks and Credit Unions:

The leadership change at the CFPB could lead to significant shifts in regulatory policies affecting community banks and credit unions. While deregulation may ease compliance burdens, it could also lead to heightened competition from non-bank lenders and fintechs, which have expanded under lighter regulatory oversight. Community banks and credit unions should stay attuned to policy changes, as adjustments in supervision, enforcement, and lending regulations could reshape the financial services landscape in the months ahead.

4. Leadership Change at Fiserv

These leadership transitions are not only reshaping financial regulation at the governmental level but also impacting the corporate landscape. Fiserv, a major provider of banking technology and payments solutions, has announced a significant leadership shift:

• CEO Frank Bisignano to Depart for a Government Role – Bisignano, who led Fiserv through transformative acquisitions and digital innovation, is stepping down as CEO to oversee the Social Security Administration under the new administration.
• Michael Lyons Named CEO-Elect – Lyons, previously head of corporate and institutional banking at PNC, will take over as Fiserv’s President and CEO-elect. His background in investment banking and corporate strategy signals potential new priorities for Fiserv’s future direction.

Why This Matters to Community Banks and Credit Unions:

Fiserv plays a critical role in the financial infrastructure for many community banks and credit unions, providing core banking systems, payment solutions, and fintech integrations. With Lyons stepping in as CEO, there could be strategic shifts in product focus, pricing, and partnerships that impact smaller financial institutions relying on Fiserv’s technology. Community banks and credit unions should keep a close eye on how Lyons steers Fiserv, particularly in areas like digital banking, correspondent banking services, and fintech collaborations, as these changes could affect long-term technology roadmaps and vendor relationships.

Read about Acceleron’s pre-integrations with top payment platforms→ 

5. Federal Reserve Pauses Rate Cuts, Signals 'Wait-and-See' Approach Amid Inflation Concerns

The Federal Reserve has decided to pause its series of interest rate cuts, adopting a cautious stance as it evaluates current economic conditions. This decision comes in light of a robust labor market and ongoing inflationary pressures. Additionally, uncertainty surrounding President Trump's proposed 25% tariffs on imports from Mexico and Canada, which he has paused for one month for further negotiations, has raised concerns about potential upward pressure on consumer prices. The Fed emphasized that future policy decisions will be data-driven, leaving the door open for adjustments should economic indicators warrant.

Why This Matters to Community Banks and Credit Unions:

The Federal Reserve's decision to halt rate cuts directly impacts lending and deposit strategies for community banks and credit unions. The added uncertainty of proposed tariffs introduces further complexity, as potential increases in consumer prices could affect borrowers' purchasing power and overall economic activity. Community financial institutions can remain vigilant, closely monitoring Federal Reserve communications and economic indicators to effectively manage interest rate risk and adjust their financial strategies accordingly.

6. TD Bank Appoints Jacqueline Sanjuas as Global Head of Financial Crime Risk Management

TD Bank has appointed Jacqueline Sanjuas as its new Global Head of Financial Crime Risk Management, effective January 23, 2025. Sanjuas, who joined TD in January 2024, previously served as Managing Director and Chief Compliance Officer of Anti-Money Laundering (AML) and BSA Officer at Citibank, bringing over 20 years of experience in compliance and risk management. In her new role, she will continue to serve as TD's U.S. BSA Officer. Sanjuas succeeds Herb Mazariegos, who is departing the bank after leading its financial crime risk management division since November 2023. The leadership change comes as TD Bank faces heightened scrutiny over high-profile compliance failures, including a significant penalty and operational restrictions imposed by U.S. regulators due to deficiencies in the bank's AML program.

Why This Matters to Community Banks and Credit Unions:

TD Bank's appointment of a seasoned compliance professional like Sanjuas underscores the increasing importance of robust financial crime risk management across the banking industry. Community banks and credit unions can take note of this development, as it reflects a broader regulatory expectation for institutions of all sizes to strengthen their AML and BSA compliance frameworks. Proactive investment in compliance infrastructure and personnel can help mitigate risks and ensure adherence to evolving regulatory standards, thereby maintaining the trust of customers and regulators alike.

For more on staying AML compliant with your correspondent bank, read our Co-Founder and Chief AML Officer Sarah Beth Felix’s article on the top 3 issues to address: 

 

Top 3 Compliance Related Issues with Your Correspondent Bank Relationship

7. FDIC Sues Former Silicon Valley Bank Executives for Gross Negligence

The Federal Deposit Insurance Corporation (FDIC) has filed a lawsuit against 17 former executives of Silicon Valley Bank (SVB), alleging gross negligence in their handling of risk management prior to the bank’s collapse in March 2023. The lawsuit seeks to recover billions of dollars in damages, citing reckless decision-making that contributed to SVB’s failure. According to the FDIC, in December 2022 — just months before the collapse — five officers and ten directors approved a “grossly imprudent” $294 million dividend payment to the bank’s parent company, SVB Financial Group, despite clear financial risks. According to the FDIC complaint, the executives also pursued higher yields by heavily investing in long-term, unhedged securities while ignoring recommended exposure limits and repeatedly violating internal risk policies. Regulators argue that these actions prioritized short-term gains over financial stability, ultimately leading to the liquidity crisis that necessitated federal intervention.

Why This Matters to Community Banks and Credit Unions:

The lawsuit against SVB’s former executives underscores the critical importance of sound risk management and executive accountability for all financial institutions. Community banks and credit unions must ensure they have strong interest rate risk controls, disciplined capital planning, and effective board oversight to avoid similar pitfalls. This case serves as a stark reminder for institutions to maintain prudent financial discipline, adhere to internal risk policies, and prioritize long-term stability.

Acceleron builds patented software that allows community banks and credit unions to conduct cross-border payment transactions profitably through a foreign exchange marketplace. Serving over 200 financial institutions and facilitating more than $1 billion in international payments annually, Acceleron helps small banks generate non-interest income and compete more effectively with high-fee big banks. Our digital correspondent banking solutions and international payments automation integrate seamlessly with top payments platforms, ensuring quick API integration for banks.  

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