WASHINGTON--In a wide-ranging set of remarks on financial regulatory reform, Treasury Secretary Scott Bessent underscored the urgent need to modernize the U.S. regulatory framework.
During his speech at the Federal Reserve Capital Conference, Bessent praised Federal Reserve Vice Chair Michelle Bowman for her focus on community banks and said the Treasury Department would play a leadership role in reimagining financial oversight to better serve both Wall Street and Main Street.
“These first steps are chipping away at years of regulatory accretion,” he said, pointing to early actions already underway, including recalibrating leverage requirements and revisiting outdated rules like the Community Reinvestment Act.
Bessent was particularly critical of the current capital framework, describing it as outdated and disconnected from actual risk. He warned that overly stringent capital requirements can reduce bank lending and drive activity into the less-regulated nonbank sector, increasing systemic risk rather than reducing it.
Notably, he flagged concerns about the 2023 capital proposal that would have subjected banks to a “dual-requirement” structure—maintaining both new and legacy capital standards, with the more stringent becoming binding. He argued this approach was not based on risk but on a desire to arbitrarily push capital levels higher, calling for its abandonment in future proposals.
In Bessent’s view, a more modern and risk-aligned capital framework could reduce burdens on institutions, particularly community banks, without compromising financial stability. He urged regulators to consider allowing banks not subject to the new rules to opt in voluntarily, which could offer them material relief. He, too, criticized the idea—floated under the prior administration—of limiting these benefits to large banks, warning that doing so would tilt the playing field and undermine smaller institutions critical to local economies.
Closing his remarks, Bessent emphasized Treasury’s intention to drive a long-term strategic vision for regulation—one that encourages growth, supports innovation, and safeguards national security.