Fed Proposes Easier Capital Rules for Mutual Banks

Mutual banks are owned by depositors rather than shareholders and typically serve local communities; more than 90% have less than $3 billion in assets. Their structure makes common-equity issuance difficult, leaving retained earnings as their main capital source and limiting growth, technology investment and lending. The Federal Reserve inherited oversight from the Office of Thrift Supervision in 2011, while Regulation MM largely preserved a framework first finalized in 1993. The overhaul is intended to help mutuals compete without abandoning depositor ownership.

The Federal Reserve Board voted unanimously on July 31, 2026, to propose changes to Regulation MM and its Regulation Q capital rule. The plan would clarify that special deposits and mutual capital certificates may qualify as common equity tier 1, additional tier 1 or tier 2 capital when relevant criteria are met. It would also ease dividend-waiver, conversion and charter procedures. Published in the Federal Register on Aug. 4, the proposal is open for public comment through Oct. 5, a period of about 60 days.