The Federal Deposit Insurance Corporation updated Chapter 4 of its Formal and Informal Enforcement Actions Manual on 8 September 2025, revising the standard required for the termination of Section 8(b) consent orders. Under the revised policy, consent orders may be terminated when a supervised institution has achieved substantial compliance with their terms, replacing the prior requirement that full compliance be demonstrated before the FDIC would consider lifting a formal enforcement action.
The change carries practical significance for the many banks and savings institutions currently operating under consent orders imposed by the FDIC. Consent orders are legally binding agreements entered into between the regulator and a supervised institution that set out remedial actions required to address identified supervisory deficiencies. Their presence on an institution's public record affects its regulatory standing, its ability to pursue acquisitions and new activities, and in some cases its capacity to attract certain categories of institutional business or partnership. The conditions for termination therefore have direct commercial and reputational consequences for the banks involved.
DEPARTURE FROM THE 2022 FULL-COMPLIANCE STANDARD
The previous FDIC policy, established in 2022, required supervised institutions to demonstrate full compliance with all terms of a Section 8(b) consent order before the agency would consider termination. That standard was viewed within the industry as relatively demanding, particularly for institutions that had substantially addressed the substantive concerns underlying an order but faced difficulty satisfying every technical or procedural condition of a multi-requirement document. Banks in that position could find themselves technically still under a formal enforcement action even when the core supervisory risks had been resolved.
By shifting to a substantial compliance threshold, the FDIC introduces discretion into the termination decision. Under the new policy, examiners and supervisory staff will assess whether the principal objectives of a consent order have been met, even if minor or isolated conditions remain outstanding. The practical effect on individual institutions will depend substantially on how the agency interprets and applies the substantial compliance standard in specific cases. The FDIC has not published detailed guidance defining what constitutes substantial compliance, leaving room for case-by-case determination by supervisory teams.
The revision is described by the FDIC as reflecting the agency's broader shift towards a less prescriptive approach to bank examination and enforcement under the current administration. US federal banking agencies have signalled a recalibration of supervisory philosophy in recent months, with stated objectives that include reducing regulatory burden on supervised institutions, increasing the speed and efficiency of supervisory processes, and applying enforcement tools in a manner more proportionate to the actual risk profile of individual institutions. The consent order change is one concrete expression of that recalibration within the FDIC's supervisory toolkit.
IMPLICATIONS FOR BANKS UNDER FORMAL ENFORCEMENT
For banks currently under active Section 8(b) consent orders, the revised standard creates an opportunity to seek earlier termination of formal enforcement status. That status, once removed, has immediate benefits: public disclosure requirements related to the order cease, restrictions on certain business activities linked to the order may lift, and the institution's regulatory standing improves in the eyes of counterparties, investors, and prospective business partners. Banks with consent orders in place are expected to engage with their FDIC supervisory contacts to understand how the new standard will be evaluated in the context of their specific remediation progress.
The FDIC published the update via a financial institution letter posted on its official website. The agency described the revision as part of its continuing review of its enforcement framework and consistent with its broader commitment to applying supervisory tools in a manner proportionate to risk. The change applies to consent orders under Section 8(b) of the Federal Deposit Insurance Act, the principal statutory provision governing formal enforcement actions by the FDIC against banks within its supervisory jurisdiction.