📊 Daily Activity Overview

Tariff policy uncertainty continues to dominate the economic backdrop, with the Trump administration asserting Section 122 authority to maintain a 15% global tariff rate following last week's Supreme Court ruling, while FedEx filed what appears to be the first major lawsuit seeking refunds on tariffs now deemed unlawful—a litigation wave that law firms are mobilizing to handle at scale. Against that macro backdrop, the Federal Reserve published its proposed rule to formally codify removal of reputation risk from its supervisory framework, following informal steps already taken, while the OCC's supervisory appeals NPR—covered Monday—moves into the comment period alongside the FDIC's recently finalized appeals guidelines.

Federal Reserve published a proposed rule to codify the removal of reputation risk from bank examination and CAMELS assessments, formalizing a supervisory philosophy shift already underway

OCC supervisory appeals NPR continues through its comment period, creating a divergent procedural landscape from FDIC's finalized approach

Tariff litigation is accelerating: FedEx's refund lawsuit signals a broader legal mobilization that will affect trade finance clients, supply chain lending portfolios, and corporate treasury relationships

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🔍 Key Regulatory Signals

The Fed's reputation risk proposal is today's most consequential regulatory development, and its mechanics matter more than the headline. Reputation risk has functioned as a supervisory catch-all—examiners have used it to flag payday lending partnerships, crypto relationships, and controversial business lines without clear standards or appeal pathways. Codifying its removal shifts accountability for reputational management to market discipline: boards, shareholders, and counterparties, rather than exam teams. Two concurrent data points—the Fed's philosophical retrenchment and the OCC's restructured appeals process—suggest federal banking agencies are actively narrowing the discretion examiners can exercise over institution-level business decisions.

Fed reputation risk removal: Banks with outstanding MRAs or CAMELS component downgrades tied to reputational concerns should assess whether those findings may be revisited under the codified framework. The Federal Register publication will set the formal comment deadline.

DOJ/FTC joint public inquiry on competitor collaboration guidance carries long-tail implications for banking: payment consortia, cybersecurity information-sharing arrangements, and open banking partnerships could eventually face scrutiny under evolving antitrust standards. Legal teams with substantial collaborative arrangements should begin documenting competitive justifications now.

BIS research on AI supply chain concentration identifies that critical AI capabilities are concentrated among firms in five jurisdictions—US, China, Taiwan, Korea, and the Netherlands—with US and Chinese firms expanding vertically across chip-to-application layers. For banks with deep dependencies on a small number of AI and cloud vendors, this reinforces existing third-party concentration risk concerns.

OCC Regulation E prepaid account information collection has a comment deadline of March 26, 2026. Two commenters have formally urged substantive amendments—including elimination of long-form disclosures and reduction of transaction history retention from 24 to 12 months. Banks with prepaid card programs may want to weigh in.

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💥 Breaking Industry News

The Evolve Bank & Trust situation continues to generate significant industry attention, with Jason Mikula reporting that creditors are seeking to offload the embattled bank's debt at 40 cents on the dollar—and raising fresh questions about which fintech partners still have customer funds held there. Separately, the stablecoin compliance picture is shifting: Stripe's stablecoin subsidiary Bridge has dropped support for high-risk jurisdictions it served as recently as December 2025, including Russia, a move that reflects tightening geographic risk posture even as the broader U.S. stablecoin regulatory framework remains unsettled. The Bank Policy Institute has published analysis arguing that FinCEN should reassert direct control over AML policy—a position reflecting industry concern about fragmented rulemaking five-plus years after the 2020 AML/CFT reform legislation.

Evolve Bank: Mikula flags that approximately 38%, or roughly $412 million, of Evolve's deposit base is uninsured, representing meaningful run risk. Fintech programs including Mercury and Dave have been exiting the institution. Banks with BaaS exposure or fintech partner dependencies should note the pattern.

Stablecoin KYC tension: Commentary circulating in industry discussions points to a structural tension: much of stablecoins' speed advantage derives from minimal identity verification requirements—a tradeoff that becomes acute when those payment rails extend into sanctioned or high-risk jurisdictions.

FinCEN whistleblower surge: Following Treasury Secretary Bessent's February 13 CNBC appearance, Treasury reports a significant increase in interest in FinCEN's whistleblower program. Internal compliance reporting channels at financial institutions may increasingly compete with external whistleblower incentives for tips.

AI as competitive battleground: JPMorgan's Monday investor presentation positioned AI as central to client engagement strategy, not merely internal productivity—a market signal about where major institutions are placing technology bets, with model risk management implications for AI-driven client-facing tools.

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⚡ Strategic Takeaways

The Fed reputation risk comment period warrants substantive engagement. This is not a routine housekeeping rule. Removing reputation risk from the supervisory framework restructures examiner discretion in ways that could affect outstanding MRAs, CAMELS component ratings, and the basis for supervisory criticism of business lines previously flagged on reputational grounds. Banks that have operated under examination friction related to crypto partnerships, fintech relationships, or politically sensitive clients should assess whether existing supervisory positions may shift. Calendar the Federal Register publication and plan substantive comment letters—this rulemaking will govern supervisory relationships for the foreseeable future.

Tariff litigation creates near-term credit quality monitoring questions. The Section 122 tariff authority expires after 150 days unless Congress extends it, and Senate Democrats have signaled opposition. FedEx's refund lawsuit is likely the first of many. Banks with significant trade finance, import/export lending, or manufacturing sector portfolios should assess how tariff refund timing and policy uncertainty affect client cash flow projections and credit quality assumptions.

Evolve's trajectory is a BaaS stress test worth tracking. The combination of missed coupon payments, creditors exiting at deep discounts, and fintech partner flight reflects what concentrated BaaS platform risk looks like under stress. Banks evaluating fintech partnership strategies—as sponsors or counterparties—should use this as a reference case for concentration, liquidity, and reputational dependencies in embedded banking arrangements.

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