US Treasury Secretary urges financial regulatory reform, Fed scraps Biden-era bank capital proposal

US Treasury Secretary Pushes Forward on Major Financial Sector Reform, Proposes Elimination of Dual Capital Requirements, Says They Create Unnecessary Burdens, Reduce Lending, and Distort Markets

July 22, 2568 at 07.58:XNUMX a.m., Reuters reported that US Treasury Secretary Scott Bessant has called for deep reforms to the country's financial regulatory system, which he calls outdated, and suggested regulators consider scrapping a dual capital requirement introduced under President Biden. Which he saw as flawed.

In his opening remarks at the Federal Reserve's regulatory meeting, Bessent said excessive capital requirements were placing unnecessary burdens on financial institutions, reducing lending, hurting economic growth and distorting markets by pushing lending into the non-bank sector.

“We need deeper reforms, with a long-term master plan focused on innovation, financial stability and sustainable growth,” Bessant said.

Under the Trump administration, the Treasury Department has been pushing a sweeping reform agenda to reduce regulations on financial institutions, including capital requirements, in a move it believes will boost economic growth and allow innovation to flourish.

Past regulators have taken an overly reactive approach, which has eroded competitiveness and led to unnecessarily complex regulations, Bessant said.

He also said the Treasury would take a more leading role in pushing for reforms, including working with the Fed and other regulators.

“We will break policy deadlocks, clear jurisdictional disputes, build consensus and push for action without allowing any single agency to stand in the way of reform.” Bessant said

Bessant also called on banking regulators to consider scrapping a dual structure proposal that was proposed in July 2566 but has not yet been implemented. The proposal would have forced banks to follow the more stringent of the two capital risk measurement approaches.

The proposal, which comes after the collapse of Silicon Valley Bank and other financial institutions in 2566, would require banks to hold much higher levels of risk reserves, drawing criticism from the financial industry.

“This dual structure is not based on sound academic principles, but rather is a back-door approach to incremental results… and it also contradicts the objectives of capital reform as a modernization program, as it would leave the old structure as a baseline for most large banks.”

He also proposed reducing capital requirements for small and community banks, offering banks that are not subject to modern requirements the ability to voluntarily opt into the new system, which would allow them to reduce their capital levels significantly.

Despite the focus on deregulation to promote growth and improve efficiency in financial markets, Bessant stressed that regulators must continue to focus on financial stability and consumer protection.

“Regulating and designing the right regulations doesn’t necessarily mean weakening the regulatory system,” Bessant concluded.

refer : reuters.com

Read news related to The full US economic situation can be found here.