The Federal Reserve is reviewing a risk-weighting policy for mortgage servicing assets (MSAs) that could provide significant capital relief to Western Alliance Bank, according to an analysis published by Risk Quantum on Tuesday.
The proposed change, outlined by Vice Chair for Supervision Michelle Bowman on February 16, would eliminate the current cap on the amount of MSAs that can be included in a bank’s Common Equity Tier 1 (CET1) capital calculation. Risk Quantum’s analysis indicates that Western Alliance stands to benefit most immediately from the adjustment, potentially reshaping approximately $92 billion in risk-weighted assets.
The move comes as Western Alliance faces ongoing scrutiny. Shares of the bank jumped in recent days following comments from Fresh York Fed President John Williams suggesting potential adjustments to interest rates, boosting expectations of a near-term Federal Reserve rate cut, according to a report from Yahoo Finance published November 23, 2025. However, the bank is also contending with legal investigations and regulatory scrutiny related to recent financial disclosures and business practices.
Western Alliance recently initiated a lawsuit against Cantor Group V LLC alleging loan collateral fraud, triggering further legal investigations. While the prospect of rate cuts has provided a lift to sentiment, regulatory scrutiny regarding disclosures and risk practices could complicate short-term momentum.
In a separate development, a rate-risk gauge for Western Alliance breached internal guidance in the first quarter, with the bank’s balance sheet modeled to lose more value to a yield-curve shock than other U.S. Regional banks, Risk Quantum reported earlier this month.
The Federal Reserve’s review of the mortgage servicing risk-weight policy is ongoing, and the potential impact on Western Alliance and other regional banks remains to be seen.