Q3 2026 Financial Services Leadership Review: Higher Rates, Looser Rules and New Competitors

Balance-Sheet Judgment as Rates Reverse

The rate reversal put balance-sheet decisions back at the center of bank performance. The Federal Reserve held rates in July and raised them in September to a range of 3.75% to 4.00%. It was the Fed’s first increase since 2023, as energy costs tied to the Iran war, tariffs and AI-related demand kept inflation at 3.4%. The 10-year Treasury yield closed above 5% for the first time since 2007, and mortgage rates rose past 7%. Deposit costs that banks expected to fall instead rose, and bonds bought when rates were lower lost value.

Results from the largest banks, reported October 13, were mixed. Trading desks had a strong quarter, led by a 72% rise in equities trading revenue at Goldman Sachs, and net interest income rose 13% at JPMorgan Chase and 14% at Citigroup from a year earlier. Wells Fargo set aside more for credit losses than a year earlier, and JPMorgan’s revenue fell short of analysts’ expectations. Regional banks, which rely more heavily on lending, have less trading revenue to offset rising deposit costs.

Beyond rates, credit risk rose on several fronts. Hiring slowed sharply in September, raising the risk that consumers would struggle to pay down $1.263 trillion in credit card balances.¹ Late payments on office loans stayed near their January peak, and private credit defaults reached a record 6.3%.² Several large private credit funds limited how much investors could withdraw, and the New York Fed examined how much large banks lent to private credit firms. Banks that lent to these funds faced tougher questions from regulators and investors about risks that had once sat outside their own loan books.

Together, these pressures raised the bar for two roles in particular: Treasurers and Chief Credit Officers. Banks currently hiring a Treasurer should look for a record of managing deposit costs and rebalancing loans and investments through rate moves in both directions, including a period when the market’s expectations proved wrong. The relevant experience for Chief Credit Officers is managing consumer loans, commercial real estate and loans to private credit funds through a downturn that hit all three at once.

Looser Supervision Meets New Competition

Regulators gave banks more room to set their own standards. The Office of the Comptroller of the Currency (OCC) and the FDIC adopted a rule that will limit examiners’ formal findings to problems that pose a real risk to a bank’s finances, effective November 2, 2026. Fewer formal findings will mean fewer outside warnings to fix weaknesses before they grow, so more of that discipline will have to come from within the bank. Capital relief has lagged, as the scaled-back rules regulators proposed in March were still not final at quarter-end.

While regulators eased their oversight, fintechs moved to become banks themselves. The OCC conditionally approved a national bank charter for Revolut in September. Chime agreed to buy its longtime partner Stride Bank for $590 million and called the purchase a faster route than applying for its own charter. Banks also bought fintechs. Valley Bank agreed to acquire the small business platform Bluevine, largely for its low-cost deposits. Fintechs gained the funding and standing of a bank, banks gained technology and deposits they could not easily build and each now competes on the other’s ground.

The expansion also met resistance. On October 2, 2026, the Independent Community Bankers of America sued the OCC to overturn the rules that let crypto firms obtain national trust charters.

Stablecoins moved from rulemaking to products. Treasury and the bank regulators proposed rules to carry out the GENIUS Act, several banks launched stablecoin offerings and the major card networks backed the Open USD stablecoin, which went live September 30, 2026. The broader bill to regulate crypto markets stalled in the Senate on September 15, 2026. Stablecoins will have federal regulation, while the rest of the digital asset market still awaits it, so banks building in this area are committing to products whose rules could change.

Much of the internal discipline that looser supervision requires falls to the Chief Risk Officer. Boards and their risk committees filling that role need someone with a record of deciding independently how much risk the bank will take and holding to that limit when the business pushes back. Fintechs moving to charters need risk, compliance and treasury leaders who have already run a regulated bank. Banks competing with them need product leaders who have launched digital products inside a regulated institution.

Who Runs the Bank Now

Dealmaking continued, and how well each deal held up largely depended on the work of combining banks. Fifth Third moved about 600,000 Comerica accounts onto its own systems in September to complete the merger that made it the ninth-largest US bank, though some customers were locked out of their accounts during the switch. Problems at that stage can cost a bank the very customers a deal was meant to bring in.

The FDIC proposed faster merger reviews in September, yet some large potential buyers held back. Executives at PNC and other large regional banks cited high bank valuations and their own AI priorities as reasons to stay out of the market. Buyers’ own priorities, not regulatory approval, increasingly set the pace of consolidation.

Succession at the top followed its own pattern, with most of the quarter’s leadership changes coming from within. Popular promoted Chief Financial Officer Jorge García to Chief Executive on September 1, moved Chief Risk Officer Lidio Soriano into the Chief Financial Officer role and named credit risk head Luis Sousa Chief Risk Officer. Wells Fargo announced that Chief Operating Officer Scott Powell, who spent years in risk roles and later ran Santander Holdings USA, will become Chief Risk Officer when Derek Flowers retires in January 2027. At JPMorgan Chase, the late-June appointment of Doug Petno and Troy Rohrbaugh as Co-Presidents narrowed the race to succeed Jamie Dimon to two internal candidates. Truist was the exception. Michael Lyons, a longtime PNC executive who most recently led Fiserv, took office September 1 as the first outsider to run the bank. Finance, risk and operations roles produced most of the quarter’s successors, which favored banks that move leaders across those functions well before a top job opens.

Below the top jobs, AI began to reduce headcount. JPMorgan said AI had cut staffing by 30% to 40% in some units, with most affected employees offered other roles. Wells Fargo said AI would shrink its workforce further after a year of steady reductions. Banks are redesigning jobs as well as eliminating them, and that work falls largely to operations leaders.

The right integration leader for deals still ahead has taken a bank through a full systems conversion and kept customers whole during it. Boards planning CEO succession should look for candidates who have run more than one function and should hold outside candidates to the same standard. As AI changes how work gets done, banks hiring a Chief Operating Officer need someone who has already redesigned jobs across a large organization and moved people into new roles in the process.

The Road Ahead

• Rates. The Fed meets October 28 and December 9, and most Fed officials projected in September that another increase would come before year-end. A further hike would hit hardest at banks whose deposit costs rise faster than what they earn on loans, a group that often includes regional banks. Banks setting 2027 budgets need plans that work whether rates rise again or level off.
• Examiner oversight. The narrower standard takes effect November 2, and the first exams under it will show how much less examiners formally flag. Boards need to decide now what internal reporting will replace examiner findings and which executive owns it.
• Capital and mergers. A final capital rule may arrive by year-end and would settle how much capital banks can put toward 2027 buybacks and acquisitions. Comments on the FDIC merger proposal close November 23. If faster reviews take hold, the time between announcing and closing a deal will shrink, and banks will need to start integration planning before announcing a deal.
• Stablecoins. The GENIUS Act takes effect January 18, 2027. Each bank will need to decide whether to issue its own stablecoin, partner with an issuer or stay out, and that decision belongs with a named executive who can weigh the revenue against the compliance obligations the law brings.
• The midterms. The November 3 elections could change the direction of financial oversight, including at the Consumer Financial Protection Bureau, which operated through the quarter under an acting director and court-ordered funding. A more active bureau would likely mean closer scrutiny of consumer lending, so Chief Compliance Officers at consumer lenders should prepare for either outcome.

Each development leaves a consequential decision to a bank’s leadership, making the executives banks hire in the coming months especially important.

SOURCES

¹ Federal Reserve Bank of New York, Household Debt and Credit Report, Q2 2026 (New York Fed) | ² Fitch Ratings, US private credit default rate, August 2026 (Private Equity Wire)

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