American financial regulation undergoes a dramatic transformation as the Treasury Department spearheads comprehensive deregulatory reforms across multiple federal agencies. U.S. Treasury Secretary Scott Bessent announced sweeping changes to the Financial Stability Oversight Council, signaling a fundamental shift from crisis-era restrictions toward growth-focused policies. This ambitious restructuring represents the most significant rollback of financial oversight since the 2008 crisis.
Treasury secretary announces FSOC restructuring priorities
Moves to comprehensively reorganize and reform the Financial Stability Oversight Council are also being implemented, and this time, it’s led by Treasury Secretary Scott Bessent, who has put greater stress on economic growth and development, as opposed to traditional means of managing risk. A significant change, as Secretary Bessent announced the creation of specific “working groups for market resilience and household resilience,” a departure from former approaches to regulation.
The FSOC will instead aim to ease what Bessent calls “undue burdens” that can stifle economic growth. These work groups will analyze the current regulation framework and find areas where there can either be a reform or full deregulation, which indicates a clearly defined approach toward minimizing the degree of regulation. Furthermore, a work group will also assess the challenges and opportunities available through the use of artificial intelligence in the finance sector.
Several agencies undertake harmonized deregulatory efforts
Federal banking regulators such as the OCC, the Fed, and the FDIC have moved to simplify regulations and limit supervisory overreach within traditional banks. The agencies have withdrawn contentious policy statements, eased capital regulations, and abandoned climate guidance deemed to be going beyond Congressional intent. The actions are intended to curb regulatory complexity.
Regulatory agencies cut staff despite less oversight
The federal financial regulatory agencies have cut a substantial number of staff members as part of purported deregulation measures, and this has significantly impacted how effectively the government can regulate and enforce actions within the finance sector. The SEC has cut 15% of staff, and this is accompanied by a 30% cut of staff members within the supervision division of the Fed, after similar measures undertaken by both the FDIC and the OCC.
The Securities and Exchange Commission has pulled fourteen proposed rules that were outstanding and announced changes in policies that give more discretion to firms regarding exclusions for shareholder proposals. SEC Chairman Paul Atkins has laid down three priorities for the reduction of the regulatory burden. These priorities include reducing reports and disclosures required by firms, limiting shareholder proposals, and limiting shareholder suits that hinder companies from listing initial public offerings.
Important deregulation moves:
- SEC staff cuts: 15% reduction.
- Supervisory force reductions: Reduction by 30%
- Withdrawing proposed rules: 14 SEC regulations
- Climate advice: Fully revoked by banking bodies
Crypto and consumer protection face targeted reforms
The administration has focused on digital assets, saying that prior regulation had stifled innovation in the industry. The banking regulatory bodies withdrew prior statements concerning direct engagement with firms dealing with crypto-assets, while the OCC made clear that banks could engage in the custody and processing of crypto-assets for their clients.
The Consumer Financial Protection Bureau has experienced radical changes in its structure, with the acting Director shutting down the headquarters, ordering employees to halt operations, and showing significant reductions in enforcement actions in various fields of consumer protection. The federal banking regulators have issued rules prohibiting the use of “reputational risk” in taking enforcement action. This was in response to concerns over “de-banking.”
The deregulation environment promotes a level of flexibility and rapid approval for financial firms, while some level of concern persists regarding the potential increased vulnerability to damage. The current trends within the regulatory environment should be carefully followed by the company, including the norms within various states and on an international level that do not necessarily conform to federal norms.
