The Fed proposes to loosen the rules for mutual holding companies

Mutual holding companies are a small corner of banking, but for the savings institutions that use the structure the rules matter a great deal. The Federal Reserve supervises them under Regulation MM, 12 CFR part 239. On 4 August 2026 the Board published a proposal called "Regulatory Modernization and Relief for Mutual Holding Companies" (91 FR 49490). It would amend Regulation MM and the capital rule in part 217.

Comments are due by 5 October 2026.

Dividend waivers

When a mutual holding company waives dividends, the money goes instead to "the other shareholders of the thrift MHC's subsidiary holding company," in the proposal's words. Regulation MM attaches member vote requirements to those waivers.

For "legacy waiver" MHCs, the Board is "proposing to eliminate the requirement that legacy waiver MHCs affirm" the waiver by an annual member vote.

For other MHCs, the proposal would require member approval "in a vote held within the past ten years" rather than every year. And it would lower the bar for that vote: the MHC "would not be required to obtain the approval of a majority of members eligible to vote," and would need "just a majority of votes cast."

Capital

The proposal would say in the capital rule that "special deposits and mutual capital certificates issued by a mutual banking organization can qualify as" common equity tier 1, additional tier 1 or tier 2 capital, as long as they meet the existing criteria. The Board would also add model term sheets as appendices.

Stock benefit plans

The proposal would simplify the size limits on stock plans for employees. A plan could not "hold in the aggregate more than either 4.9 percent of the outstanding shares" or 4.9 percent of stockholders' equity at any time. Total authorised amounts at closing "may not exceed, in the aggregate, 25 percent of the outstanding shares" or of stockholders' equity. The Board describes the current size provisions as complicated.

Smaller items

The Board would "eliminate the requirement that subsidiary holding companies of thrift MHCs have federal charters." Forms OC and OF would go, and Form PS would be streamlined. Mailing requirements would become "sending," which allows electronic delivery. Model charters and bylaws would stop being mandatory. Demand accounts would count as savings accounts for the definition, though without liquidation rights. The voluntary dissolution standard would be revised.

The structure stays. The proposal still describes a top-tier MHC that "must own at least a majority of the mid-tier holding company."

What it could mean

For an MHC, we think the dividend waiver change is worth more than everything else in the proposal put together. In our view, an annual member vote costs money and management time every year, and depositors rarely think of themselves as owners, so turnout is hard to get. Moving to a vote every ten years, decided by a majority of votes cast, turns a recurring headache into an occasional one. For a mutual with many dormant depositors, our guess is that the change in the voting bar matters as much as the change in frequency. Minority shareholders in the mid-tier company should like it too, since they are the ones who receive the waived dividends.

The capital language is quieter but could matter for mutuals that can't raise common stock. If mutual capital certificates clearly count toward regulatory capital, a mutual has a way to build capital without converting. Our guess is that few will use it soon. The model term sheets, though, should make the first deals cheaper to document.

There's a fair question about members' interests. Fewer and easier votes mean members have less frequent say over money that, in a mutual, is arguably theirs. We'd expect some comments along those lines, and the Board may keep a version of the vote that's stricter than proposed.

If you run an MHC, the timing works in your favour. The comment window runs to 5 October. It's worth having counsel read the dividend waiver text against your own charter and past member votes, so you know which category you fall into and whether a final rule would save you next year's vote.