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On November 18, 2025, the Federal Reserve quietly released its Statement of Supervisory Operating Principles — and called it, in their own words, “a significant shift from past operating practices.”
That’s an understatement.
Here’s what changed, why it matters, and what it means for every bank operating under Fed oversight.
The old world: checkbox banking
For years, Fed examiners showed up and looked at everything — processes, procedures, documentation, governance structures. If your policy binder wasn’t thick enough, you got an MRA (Matter Requiring Attention). If your model validation form had gaps, you got flagged. Risk management culture? Measured by the weight of your internal memos.
The result? Banks spent enormous resources proving they looked safe rather than being safe. Compliance teams grew. Documentation exploded. And examiners sometimes lost the forest for the trees.
The new world: material risk, only
The new memo directs examiners to prioritize their attention on material financial risks — explicitly not “processes, procedures and documentation.”
This is a seismic shift. Three things changed immediately:
1. MRAs just got a higher bar
MRAs and MRIAs should now prioritize deficiencies that could have a material impact on a firm’s financial condition, rather than focusing on procedural or documentation shortcomings that do not materially threaten safety and soundness. The prior standard under SR 13-13 was much broader — any potential risk or governance gap could trigger one.
2. Supervisory observations are back
Supervisory observations will be used for minor issues, reducing the burden of formal remediation for non-material deficiencies. This reverses a prior directive that had eliminated these softer, nonbinding nudges entirely. Now examiners have a middle gear — not everything needs to be escalated to a formal MRA.
3. CAMELS ratings reset
Supervisory ratings should accurately reflect an institution’s financial condition and material financial risks. The management and risk management components of CAMELS ratings should not be given more weight than the other components in determining a firm’s composite rating. Translation: a bank with excellent capital and liquidity won’t be dragged down by a borderline management score anymore.
Who’s behind this?
The Statement translates Vice Chair for Supervision Michelle Bowman’s stated priorities into concrete operating expectations for supervisory staff at the Federal Reserve Board and Federal Reserve Banks.
Bowman has been explicit: supervision should be proportionate, timely, and focused on what actually threatens the financial system — not on building regulatory paper trails.
Supervision will now be tailored based on the size, complexity, and systemic importance of banking organizations, with greater reliance on the work of primary state and federal supervisors.
What’s coming next
To make the changes stick, the Fed is expected to further hard-wire them into supervisory infrastructure — defining “unsafe and unsound practices” and what is “material” for purposes of supervisory criticism, updating SR letters and examiner manuals, and retraining examiners across the Federal Reserve Banks.
The Fed also plans to issue more detailed guidance on its standards for issuing MRAs and MRIAs based on safety-and-soundness threats, which should align these standards across all three federal banking agencies.
What this means for you
If you work in risk, compliance, or bank management — this is your signal to:
→ Reassess your MRA remediation backlog. Some items may no longer meet the new materiality threshold.
→ Engage your examiners differently. The door is now open for real dialogue on whether a finding is justified.
→ Don’t drop your documentation — but stop over-investing in it. Robust records for material risk areas remain essential.
→ Watch for updated SR letters in 2026. The policy shift still needs to be codified into examiner manuals and training.
The Fed isn’t going easy on banks. It’s going smarter. The era of checkbox supervision is over — at least in principle.
The question is whether examiner behavior actually follows the memo.