The Fed is taking another look at how it rates banks. According to Michelle Bowman, Vice Chair for Supervision, the agency is rethinking its bank rating methodology as part of the ongoing shift toward prioritizing supervision focused on material risks to financial institutions. This move reflects the broader policy direction under the current administration—refocusing regulatory efforts on what actually matters for lender stability. The implications here are significant for market participants: tighter, more targeted oversight on substantial risks could reshape how banks operate and manage their portfolios, which in turn affects liquidity and risk appetite across markets. Whether this leads to clearer, more efficient oversight or creates new compliance headaches for institutions remains to be seen. Either way, traders and market watchers should be paying attention to how these rating adjustments unfold.