Treasury secretary urges regulatory 'reset' to bolster community banks

Treasury Secretary Scott Bessent urged community bankers to seize a chance for regulatory change, saying the administration has begun a “fundamental reset” of financial regulation to ease burdens on smaller institutions while preserving safety and soundness. Speaking at the Federal Reserve’s community banking conference, Bessent said the goal is to help community banks “retake market share” and support Main Street lending after what he described as a post‑crisis framework that favored larger, centralized banks.

Bessent framed the policy changes as a response to industry trends and practical problems he hears on visits to community banks. “To reverse course, earlier this year, I called for a fundamental reset of financial regulation,” he said, outlining priorities that include revising reporting burdens, refining AML/CFT requirements, and working with regulators to tailor examinations and measurement thresholds.

He highlighted concrete steps already under way: proposals to clarify the use of reputation risk in supervisory criticism, regulatory action intended to narrow examinations’ focus to material financial risk, and coordination among agencies on exam processes. On illicit finance, he said FinCEN’s recent FAQs addressed pain points such as CTR filings and the handling of SARs, and called for a refocus on program effectiveness rather than purely process checks.

Bessent also described ongoing legislative and regulatory work that could affect community banks, including congressional consideration of expanded FDIC insurance on certain transaction accounts and proposals to index or revisit asset thresholds that trigger different regulatory regimes. He urged bankers to press for reforms that reduce unnecessary compliance costs while maintaining consumer protections.

Bessent closed by appealing to bankers’ business instincts: community banks should use new policy space to compete, innovate and expand lending to local businesses and households. The conference continued with panels on tokenization, capital standards and supervisory tailoring; Vice Chair Mickey Bowman and Federal Reserve staff reiterated a desire to align supervision with the size and complexity of firms.