In June, the Fed published its Supervision and Regulation Report, finding that the U.S. banking system maintained strong capital and liquidity levels, profitability, and healthy loan growth. The report states that more than 99 percent of banks were well capitalized as of the fourth quarter of 2025, with aggregate common equity tier 1 risk-based capital ratios of about 13 percent for both large and small banks. The Fed also reported that aggregate deposits at commercial banks reached a historical high of $19.5 trillion by February, while loan balances at the end of 2025 increased by 5.6 percent from a year earlier. The report states that loans to nondepository financial institutions continued to expand as banks partnered with nonbank financial entities. The Fed also noted that some banks were revisiting collateral-management practices for those exposures. Delinquency rates rose slightly across several loan categories, including consumer, commercial real estate, and residential real estate loans, but the total loan delinquency rate remained below the long-run historical average.

The report also summarizes several regulatory and supervisory developments, including a February 23 proposal to codify the removal of reputation risk from the Fed’s supervisory program (covered by InfoBytes here), March 19 proposals by the Fed and other prudential regulators to modernize capital requirements (covered here), and an April 23 final rule lowering the Community Bank Leverage Ratio from 9 percent to 8 percent, effective July 1 (covered here). The report also states that, as of December 31, 2025, most large financial institutions (LFIs) were satisfactory across all three LFI-rating components and considered “well-managed,” and that the proportion considered well-managed increased after the revised LFI rating system (previously covered here) took effect January 16. The report further notes that the Fed has begun reviewing outstanding safety-and-soundness-related Matters Requiring Attention and Matters Requiring Immediate Attention for alignment with its supervisory operating principles, and that matters inconsistent with those principles would be downgraded to observations or closed.