In remarks at the Federal Reserve Community Bank Conference, Treasury Secretary Scott Bessent argued that the post-crisis regulatory framework has disadvantaged community banks and called for a “fundamental reset” focused on stronger tailoring and supervision centered on material financial risk rather than process and documentation. He outlined actions the Administration and agencies have taken to reduce regulatory burden on community banks and previewed further work on anti-money laundering and countering the financing of terrorism (AML/CFT), capital, and deposit insurance. The remarks cited a sharp contraction in the community bank sector since 2010, including the loss of 3,600 community banks (over 45 percent) and declines in community banks’ shares of assets and lending. Measures highlighted included ending the use of reputation risk in supervision, proposing to rescind a 60,000-word Community Reinvestment Act rule, and retracting a merger policy statement. Agency-specific steps referenced included Federal Deposit Insurance Corporation work to raise and index asset thresholds, streamline examinations and branch applications, and reestablish a supervisory appeals body, and Office of the Comptroller of the Currency changes including a 30 percent reduction in assessments on smaller banks and a shift to more risk-based examination scheduling. The speech also pointed to Consumer Financial Protection Bureau moves to revisit Section 1071 reporting and the open banking rule and to withdraw more than 60 interpretive rules and other guidance, alongside recent Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency proposals to codify limits on reputation-risk-based supervisory criticism and to define “unsafe or unsound practice or condition.” On illicit finance, FinCEN released FAQs addressing community bank concerns on Currency Transaction Report filings and structuring Suspicious Activity Reports, including continuing activity reviews and the absence of any requirement to document a decision not to file a Suspicious Activity Report. Looking ahead, Bessent said he expected work on the Community Bank Leverage Ratio to culminate in a proposed reduction, and he previewed a joint FinCEN and banking regulator proposal to define requirements for an effective AML/CFT program, with supervision recentered on program effectiveness and FinCEN positioned as a gatekeeper for AML/CFT enforcement. Treasury’s stated priorities also included reforms to supervisory ratings and appeals, reducing duplicative examinations, and reviewing core platform providers’ contract terms, as well as capital framework modernization that could reduce capital requirements for large banks on mortgages and investment-grade corporate loans while giving smaller banks the option to benefit from reduced requirements. He also endorsed ongoing congressional work to modernize deposit insurance, including increasing Federal Deposit Insurance Corporation insurance limits on noninterest-bearing transaction accounts, and said any actions on Fannie Mae and Freddie Mac should not increase borrowing costs and should preserve equal secondary market access for small lenders.
U.S. Department of the Treasury 2025-10-09
U.S. Department of the Treasury sets out community bank regulatory reset and flags forthcoming AML CFT program and capital changes
At the Federal Reserve Community Bank Conference, Treasury Secretary Scott Bessent urged a "fundamental reset" of the post-crisis regulatory framework to support community banks, focusing on tailored supervision and material financial risk. He proposed reducing regulatory burdens, revising the Community Reinvestment Act, merger policies, and supervisory practices, while addressing AML/CFT efforts. Bessent also mentioned potential reductions in the Community Bank Leverage Ratio and reforms to capital requirements, deposit insurance, and supervisory ratings.