By David Lawder and Pete Schroeder
WASHINGTON (Reuters) – U.S. Treasury Secretary Scott Bessent said on Wednesday his department will play a greater role in banking regulation to better balance costs and benefits and ensure that lenders can finance growth in the U.S. economy.
In prepared remarks to an American Bankers Association conference, Bessent called for “commonsense principles” in banking regulations to ease burdens, especially for community banks that have had to deal with rules tailored for larger institutions.
Bessent said Treasury’s stronger involvement in crafting bank regulation would be achieved through the Financial Stability Oversight Council, which meets regularly and includes the heads of the Federal Reserve and other bank regulators.
He also said he would use the President’s Working Group on Capital Markets, a smaller committee that studies financial trends and has sometimes met during financial crises. Treasury engagement with individual regulators, such as the Office of the Comptroller of the Currency or the Federal Deposit Insurance Corporation, is another tool for this.
In the past, bank regulators have exercised vast powers on almost every aspect of daily life – but without meaningful accountability to the American people,” Bessent said. “Most glaringly, regulation through supervision has too often taken place behind a veil of secrecy that precludes scrutiny by the public and their elected officials.”
Bessent’s remarks were short on specific proposed changes to banking regulations or capital requirements, but he said that the Trump administration would look at the capital buffer framework for large banks to ensure that it’s consistent with law and acts as an appropriate backstop.
He said that his principles for regulation should derive from a clear statutory mandate, including safety and soundness, mitigating risk and consumer protection.
“Second regulation should be efficient. That means regulations should strike an appropriate balance between costs and benefits,” Bessent said, adding that regulators themselves needed efficiency in their budget and staffing.
MORE TAILORED REGULATION
Bessent said that regulation should be fair and applied evenly across entities.
“The Treasury Department intends to drive a change in the culture of supervision through improvements to examination procedures, enhanced monitoring of examiners’ compliance with those procedures, and more realistic processes for appealing supervisory findings,” Bessent said. “Perhaps the most consequential step would be to define ‘unsafe and unsound’ by rule using more objective measures rooted in financial risk.”
