Further Clarity on Potential Deregulation for U.S. Community Banks

This commentary addresses the implications of a speech by Treasury Secretary Scott Bessent at a recent American Bankers Association conference.

Key highlights include:
-- The Trump administration's desire to reduce the regulatory burden for banks, especially community banks, remains a key objective of anticipated regulatory reform.

-- The Treasury Department is signaling its intent to take a greater role in overseeing bank regulation and regulators. The department expects reform on a number of fronts including further tailoring of rules for community banks, a refocused supervision on safety and soundness priorities, and a closer look at capital and liquidity requirements.

-- While we expect many of the changes to primarily affect community banks, some discussed changes to capital and liquidity requirements would affect all banks.

"At a high level, we view these comments favorably, as they make economic sense and focus on safety and soundness, likely leading to improved efficiency and competitiveness over the long term. However, while additional regulatory tailoring and a lighter regulatory touch may be appropriate in some cases, we are also cognizant of potential risks and unintended consequences following periods of deregulation," said John Mackerey, Senior Vice President, Sector Lead, North American Financial Institution Ratings.