Bessent says US Treasury to take stronger role in bank regulation, easing undue burdens

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."

He said he would be particularly focused on a more tailored regulation of community banks that have struggled with "undue compliance burdens" that require heavy investments in technology.

"For the last four decades, Wall Street has grown wealthier than ever before. And it can continue to grow and do well," Bessent said. But for the next four years, it's Main Street's turn" to drive investment.

Bessent also criticized the Basel Committee's Endgame standards, saying that in his opinion, this was not the right starting point for U.S. regulatory modernization.

"We need to take a different approach. We should not outsource decision making for the United States to international bodies," he said, adding that the U.S. should conduct an analysis tailored to its interests, and the U.S. can "borrow selectively from the Basel Endgame standards.

Bessent's prepared remarks made no mention of President Donald Trump's tariffs on global trading partners or their impact on financial markets.

(Reporting by David Lawder; Editing by Paul Simao)