Banking Regulators Report Progress on Right-Sizing Regulation
At a Senate Banking Committee hearing, federal prudential regulators described a coordinated push to recalibrate capital and supervision frameworks to better align regulatory burden with institutional risk while preserving safety and soundness.
The banking regulators testified that current regulatory frameworks stifle growth and innovation. They described an ongoing shift toward tailoring rules, enhancing transparency, and rightsizing supervision to promote economic opportunity.
Michelle Bowman, Vice Chair for Supervision at the Federal Reserve, emphasized the Fed’s focus on regulatory tailoring and greater supervisory transparency. She noted that banking conditions remain sound, with strong capital ratios and profitability, while nonbank financial institutions continue to gain market share in lending and payments. On community banking, she advocated for reducing regulatory burdens by updating long-outdated statutory asset and reporting thresholds and streamlining merger and application processes. She also outlined efforts to modernize large bank supervision, including recalibrating the capital framework from the "bottom up," eliminating the use of "reputational risk," and publishing internal supervisory manuals to enhance transparency and accountability.
Travis Hill, Chair of the FDIC, highlighted the FDIC’s efforts to reform supervision, modernize resolution planning, and support responsible financial innovation. He described a shift away from process-driven examinations toward a sharper focus on core, material financial risks, including efforts to define "unsafe or unsound" practices and review existing supervisory criticisms. He highlighted the establishment of a standalone Office of Supervisory Appeals to ensure an objective and consistent appeals process. He also outlined updates to large bank resolution planning and steps to improve failed-bank auctions. He further underscored a more open-minded approach to digital assets, rescinding prior restrictive requirements and advancing implementation of a regulatory framework for payment stablecoins under the GENIUS Act.
Jonathan V. Gould, Comptroller of the Currency, prioritized fair access to banking services and supervisory reform. He asserted that the agency is actively investigating "debanking" complaints based on political or religious beliefs and proposing to remove "reputation risk" from supervision. Mr. Gould argued for a return to a risk-based approach relying on examiner judgment rather than arbitrary checklists, claiming that a focus on eliminating rather than managing risk had stifled innovation. He further expressed support for the GENIUS Act regarding payment stablecoins and committed to working with banks on adopting technologies like artificial intelligence. He also emphasized targeted regulatory relief and modernization efforts to ensure community banks remain competitive and the federal banking system stays dynamic and resilient.
Kyle Hauptman, Chair of the NCUA, addressed the agency's initiatives to reduce regulatory burdens and restructure its workforce. He stated that the agency launched a Deregulation Project to remove obsolete regulations and published a policy explicitly barring regulation by enforcement. Mr. Hauptman highlighted efforts to implement the GENIUS Act by proposing a process for credit unions to license as payment stablecoin issuers. He also reported a significant organizational transformation, noting that the agency achieved a 23 percent workforce reduction in 2025. He emphasized that these reforms are intended to right-size supervision, protect the Share Insurance Fund, and create space for credit unions to innovate responsibly, including through artificial intelligence and digital asset technologies.