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What You Need to Know: California joins other states in pushing back on federal attempts to weaken banking oversight and undercut common-sense regulations that protect against bank collapses.

August 26, 2026 - SACRAMENTO – In a new comment letter, the California Department of Financial Protection and Innovation (DFPI) opposed federal regulators’ proposed changes to the nation’s bank rating system known as CAMELS, warning that the move will jeopardize the economic well‑being of millions of Californians and hurt communities and small businesses. As part of its ongoing work to fight back against federal financial deregulation, DFPI joined other states in opposing federal regulators’ efforts to weaken critical bank supervision.

“California believes that regulators should be strengthening bank supervision to protect consumers and small businesses, not rolling it back and risking another bank crisis. Forward-looking oversight is critical — without it, more banks will fail, and consumers will pay the price,” said DFPI Commissioner KC Mohseni. “The FFIEC should reverse course on these proposed changes immediately. While federal regulators work to weaken common-sense oversight that keeps our financial system stable, California will continue to fight back to protect consumers and prevent future bank failures.”

For half a century, the CAMELS rating system has been a cornerstone of financial stability, helping regulators monitor the health of banks where consumers keep their money and financial assets. It has served as a critical tool for assessing and identifying threats to the safety and stability of our financial institutions.

New proposed changes from the Federal Financial Institutions Examination Council’s (FFIEC) would shift the CAMELS framework’s focus to deprioritize management and supervisory processes, undermining banks’ and regulators’ ability to spot and address early signs of emerging problems. The move threatens to hurt communities across California, including small and rural banks, by weakening critical oversight.

The 2023 failure of Silicon Valley Bank demonstrates the need for strong management supervision — but instead of strengthening forward-looking supervision to prevent crises, the FFIEC’s proposed revisions will make it harder to identify financial risks before they become so significant and severe that it may be too late to act. DFPI will continue its work to prevent future bank failures like that of Silicon Valley Bank and protect Californians.

Read the Department’s current and previous comment letters here.

About DFPI

The Department of Financial Protection and Innovation protects consumers, regulates financial services, and fosters responsible innovation. DFPI protects consumers by establishing and enforcing financial regulations that promote transparency and accountability. We empower all Californians to access a fair and equitable financial marketplace through education and by helping to prevent potential risks, fraud, and abuse. Learn more at dfpi.ca.gov.

Source:  CA. Department of Financial Protection and Innovation