Banking Brief: Q2 2025

Headlines in the second quarter of 2025 were dominated by trade talks and massive stock market swings, so banking news didn’t get significant exposure. We’ve summarized some of the major stories you may have missed in a new quarterly publication called Banking Brief.

The Santa Anna National Bank Failed

The second bank failure of 2025 took place in the second quarter with the closure of Santa Anna National Bank in Santa Anna, Texas on June 27^th. The FDIC reported that suspected fraud contributed to the bank’s failure, and the subsequent $23.7 million cost to the Deposit Insurance Fund.

The Santa Anna National Bank had total assets of $63.8 million and total deposits of $53.8 million. Approximately $2.8 million of those deposits exceeded the FDIC limit of $250,000 per account owner.

Following the closure, Coleman County State Bank agreed to assume the insured deposits and some assets of the failed bank. However, the FDIC will retain a large portion of the bank’s other assets for now.

Depositors at the failed bank will be able to access their insured deposits via ATM, check, and debit cards. The FDIC has not yet announced how or if large depositors will be able to access their uninsured funds. Instead, they are encouraging these customers to contact a toll-free number to schedule an appointment to discuss their situation.

The FOMC Held Interest Rates Steady and Updated Projections

The FOMC held interest rates steady at both the May and June meetings at a target range of 4.25 – 4.50%. They also maintained their expectation for interest rates to fall to 3.9% by the end of the year in their most recent projections. Further, their projected path for interest rates was updated to show continued declines to 3.6% by the end of 2026, 3.4% by the end of 2027, and 3.0% in the long run.

Other projections from the FOMC suggest the economic situation will worsen throughout the year. GDP is projected to grow by just 1.4% for 2025 as a whole – half the growth experienced in 2024. Additionally, the unemployment rate is expected to rise from the current level of 4.2% to 4.5% by the end of the year. Finally, the inflation rate is projected to rise from the current level of 2.3% to 3.0% this year. A slower economy with higher unemployment and inflation could impact depositor behavior and dampen bank success.

Top Economic Agencies Proposed a Change to a Key Bank Reserve Ratio

A recently proposed change will impact reserve requirements – the amount of cash assets a bank must maintain. This proposal would lower the Enhanced Supplementary Leverage Ratio [eSLR] for the country’s largest banks.

The eSLR ratio was implemented after the 2008 financial crisis as a higher, more stringent reserve requirement for Global Systemically Important Banks [GSIBs]. These financial institutions are “too big to fail,” meaning that they are so large, complex, and interconnected that their failure could trigger a widespread financial crisis.

The change would apply to GSIB banks, holding companies, and subsidiaries. It would tie the amount these companies need to hold in reserve to their role in the global financial system.

Proponents of the change believe the current requirements constrained banking activities and disincentivized GSIBs from facilitating Treasury market trading. Further, the American Bankers Association called the proposal, “an important step toward strengthening our financial system, reducing bank funding costs and allowing institutions to do even more to support the economy without compromising safety and soundness.”

FinCEN And Other Agencies Approve 3^rd Party Identity Verification

The Financial Crimes Enforcement Network [FinCEN] and three of the federal banking agencies approved a change that will enable banks to streamline account opening. It allows financial institutions to gather taxpayer identification number [TIN] information from third-party sources rather than the account owner. Banks are not required to use third-party data, but they now have the option as long as they meet the other regulatory requirements.

For background, the Customer Identification Program [CIP] rules that were implemented as part of the USA PATRIOT Act in 2001 require financial institutions to gather data that proves the identity of an account opener. One such piece of data is the TIN.

FinCEN Director Andrea Gacki said that the change “reduces burden by providing banks with greater flexibility in determining how to fulfill their existing regulatory obligations.” Further, she said that third-party data gathering would not increase the risk of money laundering, terrorist financing, or other financial crimes.

Both regulatory changes in the past quarter could benefit banks by helping to reduce the burden of account opening and allowing more investment options. These changes are particularly important given the FOMC’s projections for a weakening economy this year and the recent bank failure.

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