09/30/26

The Ohio Bankers League has filed a comment letter supporting the Federal Reserve’s proposed reforms to mutual capital certificates and dividend waivers, two areas where OBL has advocated for greater flexibility for years. With Ohio home to the second-largest number of mutual institutions in the country, these changes carry particular importance for our banking industry and the communities it serves.

Mutual banks should have practical opportunities to raise capital, grow, and meet customer needs while preserving their mutual ownership structure. The Federal Reserve’s proposal represents meaningful progress toward that goal by clarifying the treatment of mutual capital instruments and reducing procedural burdens on mutual holding companies.

Unlike stock institutions, mutual banks cannot issue common shares to raise additional capital and generally rely heavily on retained earnings. That can constrain their ability to expand lending, invest in technology, or respond quickly to changing community needs. Mutual capital certificates, or MCCs, offer another avenue for raising capital while maintaining mutual ownership.

The proposal would clarify how qualifying MCCs can count toward regulatory capital and provide model terms for instruments eligible for Common Equity Tier 1 or Additional Tier 1 treatment. These instruments would provide permanent capital that can absorb losses, with distributions that the institution can cancel when it needs to conserve resources. This flexibility could help mutual banks support additional home mortgages and small business loans, strengthen their financial position, and invest in services customers increasingly expect.

OBL’s letter emphasizes that this authority must be practical to use. We urged the Federal Reserve to coordinate with the OCC, FDIC, and state regulators on consistent standards and predictable issuance procedures. Banks using approved model terms should have a clear path to capital recognition without repeatedly negotiating the same questions with regulators.

The letter also strongly supports proposed relief for dividend waivers. These waivers allow a mutual holding company to forgo dividends from its subsidiary, helping make minority shares more attractive to investors and supporting future capital raises while preserving mutual control. For eligible legacy mutual holding companies, the proposal would eliminate the annual member-vote requirement. For non-legacy institutions, it would establish a ten-year member-approval period, use a majority-of-votes-cast standard, and remove restrictive director-abstention and insider-waiver conditions. Fiduciary duties, member disclosures, and safety-and-soundness protections would remain.

OBL has long argued that repetitive voting requirements and cumbersome procedures consume resources without delivering a corresponding benefit to members. Our letter calls for a consistent notice process and further alignment between legacy and non-legacy institutions wherever the law permits.

Together, MCC flexibility and dividend-waiver reform would give mutual institutions more options to strengthen capital and pursue responsible growth. OBL will continue pressing for a final rule that turns these longstanding advocacy priorities into workable tools for Ohio’s mutual banks.