Banking Brief: Q3 2025

This quarter’s top banking story was the Fed lowering interest rates toward the end of the period. Additionally, regulators proposed updates to the criteria for being considered “well managed” and how FDIC signage must be displayed.

Banking stories like these can fall to the bottom of news sites when they don’t have a direct impact on the general public. Fortunately, we bring these insights to the forefront for business and banking leaders each quarter.

FOMC Lowered Interest Rates, Updated Projections

The FOMC held interest rates steady at the July meeting, then lowered the target range for the Fed Funds Rate in September. They also updated their projections for the future of the economy at the final meeting in the third quarter, showing mixed signals for the remainder of 2025.

• Unemployment Expected to Rise. The FOMC projects that the unemployment rate will rise from the current level of 4.3% to 4.5% by the end of the year.
• Inflation Forecasted to Worsen. The projections show inflation rising from the current level of 2.7% to 3.0% this year.
• GDP To Grow Modestly for the Year. Committee members expect GDP to rise by 1.6% for the year, following a decline of 0.6% in the first quarter and an improvement of 3.8% in the second quarter.
• Further Interest Rate Cuts Anticipated. The forecasts show an end-of-year Fed Funds Rate of 3.6% – which could be achieved by two quarter-point cuts or one larger reduction.

Over the next several years, the FOMC anticipates a period of normalization. Unemployment and inflation are expected to decline, while GDP is forecasted to rise. These changes are expected to occur alongside further interest rate reductions.

Federal Reserve Proposed Revisions to the LFI Framework

The Federal Reserve proposed changes to the supervisory rating systems for Large Financial Institutions [LFIs]. The main modification would allow institutions with one Deficient-1 rating to achieve “well managed” status.

For background, the Federal Reserve Board uses two frameworks to supervise these institutions. They measure Capital Planning & Positions, Liquidity Risk Management & Positions, and Governance & Controls.

Each of these components is rated on a four-point scale with possible outcomes being Broadly Meets Expectations, Conditionally Meets Expectations, Deficient-1, and Deficient-2. These ratings determine if the institution is considered “well managed.” Institutions who achieve this status may engage in certain expansionary activities and investments without prior approval.

Under the current rule, institutions are not considered “well managed” if they receive a Deficient-1 or Deficient-2 rating in any category. The proposed change would consider an institution “well managed” if it has no more than one Deficient-1 rating. However, any Deficient-2 rating would still disqualify the institution from being “well managed.”

The change was proposed because many LFIs with a single Deficient-1 rating have sufficient financial and operational strength to expand safely. These institutions would gain more flexibility under the new rule, and the Fed would still maintain a robust supervisory standard for firms with serious deficiencies.

FDIC Proposed New Signage Rules

The FDIC also proposed a rule change in the third quarter. This proposed amendment would replace 2023 signage rules with those that are simpler for insured institutions to implement.

The 2023 rules imposed strict guidelines for how and when insured institutions should use certain signage to denote whether accounts and investments are insured by the FDIC. However, some leaders at impacted institutions argued that the rules were difficult to implement, particularly on digital channels. This pushback caused the FDIC to delay the requirements twice to provide time to amend the rules.

The August 2025 proposal aims to minimize implementation burden, while still addressing potential customer confusion. Some of the key changes include:

• Digital Signage Flexibility. Under the proposed rules, the FDIC would no longer limit colors to specific hexadecimal codes and allow for a white logo on dark backgrounds. Banks would also be free from specific pixel and font size requirements and instead be able to use their judgement to determine if the sign is “clear and conspicuous.” Finally, insured institutions would be allowed to wrap the text of the official FDIC sign to address space constraints. These changes would allow banks to prominently display the required sign without overhauling their digital designs.
• Streamlined Display Requirements. The FDIC proposed removing the requirement to display the FDIC logo on “landing pages,” instead using the industry-accepted term “login pages.” The new rule would also eliminate the need to show the FDIC logo on every page where a customer transacts with deposits and instead require the logo on pages where the customer establishes an account. These changes remove confusion from pages containing both insured and uninsured account types and further improve flexibility in digital design.
• Third-Party Site Notifications. The proposed rule would amend the requirement for notifying a customer that they are moving from a bank website to one operated by a third party. The applicable notification would need to be present on the screen for three seconds or require the user to take action to dismiss it. This change is intended to address the implementation challenges that banks brought forward, while still ensuring that users have adequate notice that they will be interacting with a third-party site.

The proposed changes seek to balance depositor understanding with the practicalities of digital design. The proposal is in a period of public comment through October 20^th.

The three banking industry changes we’ve highlighted in this publication clearly show that the economy and regulations are constantly shifting. By following these trends, business and banking leaders can remain adaptable and are able to better position the organizations they represent.

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