Fed’s Revised Oversight Framework Lifts Large-Bank Ratings, Flags Nonbank Lending Risks

The Federal Reserve’s Large Financial Institution rating system applies to major U.S. banks with at least $100 billion in total assets and foreign banks with the same level of U.S. assets. It determines whether an institution is “well managed” based on capital, liquidity and governance. That designation affects a financial holding company’s flexibility to expand, pursue mergers and acquisitions, and engage in a broader range of financial activities, meaning changes to the definition directly alter regulatory constraints.

The Fed issued its report on June 11, 2026. The revised LFI framework took effect on January 16, and about 80% of large financial institutions were rated “well managed” as of January 31. The report also said bank lending to nonbank financial institutions continued to grow in 2025, though it did not disclose the total amount. Following several high-profile defaults, the Fed has made related exposures and collateral management a supervisory priority.