- Scott Bessent vows to expand the Treasury’s role in shaping financial regulations and oversight.
- Treasury plans tailored rules for community banks to ease compliance burdens and boost growth.
- Capital and liquidity standards will be reassessed to enhance lending and economic resilience.
During his appearance at the American Bankers Association’s Washington Summit, U.S. Treasury Secretary Scott Bessent declared that his department would enlarge its financial regulatory functions.
At the American Bankers Association’s Washington Summit, Bessent declared that regulatory measures should maintain compliance with both the statutory framework and presidential directives. He highlighted the necessity of limiting bureaucratic expansion because this action would make regulatory processes accountable while maintaining operational excellence.
Bessent explained that the Financial Stability Oversight Council, along with the President’s Working Group on Financial Markets, creates channels through which the Treasury can increase its contribution. According to his statement, the Treasury Department will concentrate on improving regulatory tailoring methods, capital and liquidity requirements, supervision processes, and the anti-money laundering framework.
Focus on Community Banks and Regulatory Actions
Bessent explained that small and community banks handle more regulatory obligations than other institutions. He recommended that regulations be applied with specialization based on distinct business model risk characteristics. The Treasury will support full exemptions for community banks from specific regulations while pressuring these institutions to avoid unacceptable regulatory constraints.
The Treasury will review the Consumer Financial Protection Bureau’s systems regarding recent regulatory actions, particularly those concerning third-party risk management and information security. According to Bessent, supervising material financial risks by the Treasury would produce the most critical reforms. He also proposed upgraded examination techniques and enhanced oversight transparency.
Capital Requirements and Liquidity Rules Under Review
According to his view, Bessent criticized the Basel Committee and similar international authorities because they did not provide sufficient support in setting financial capital thresholds. His stance supported an American analysis scheme to select the best capital structure framework. Modernizing regulatory capital standards would probably result in lower capital requirements applicable to mortgage loans and significant exposures of community banks.
According to him, leverage capital rules have the potential to restrict financial institutions from properly delivering services to their communities. Bessent disclosed that regulators planned to modify leverage capital requirements to obtain a better equilibrium between risk management and lending operations.
The Treasury plans to reevaluate the liquidity framework introduced after the 2008 financial crisis. The liquidity situation improved, yet the movement of funds toward safe investments reduced resources available for loan production. According to him, the current liquidity standards needed an evaluation regarding their total benefits versus expenses.
Future Regulatory Reforms and Focus on Innovation
During his speech, Bessent explained that his team would push for modifications to anti-money laundering and counterterrorism financing regulations. He explained how the strategy should focus on high-risk threat areas, with permission for financial institutions to disregard less vulnerable operations.
The Treasury plans to collaborate with Congress to establish reforms regarding deposit insurance and improve bank resolution tactics learned from current bank failure situations.
Bessent announced that the Treasury would conduct regulatory assessments of blockchain, new payment systems, and stablecoins to align with developing technical advancements. He stated that the financial system needs large banks to maintain equal competitive standing with small banks and nonbank lenders to promote a better financial environment.
