NEW YORK — Treasury Secretary Scott Bessent Thursday called for bank regulators to better coordinate their regulators and supervisory activities and called for an overhaul of the post-crisis regulatory framework, which he said was outdated and stifles economic growth.
Speaking to a crowd at the New York Economic Club, Bessent outlined a vision for remaking supervision, reducing regulatory burdens and refocusing oversight on material financial risks rather than procedural compliance. He emphasized that, rather than focusing on consolidating agencies, he is focused on making financial regulation more efficient, effective and tailored to individual risks.
"We need our financial regulators singing in unison from the same song sheet," he said. "To be clear, this does not mean consolidation of agencies, but coordination via Treasury, such that our regulators work in parallel with each other and industry. Backward-looking policies in response to an undercapitalized system predating the Global Financial Crisis almost two decades ago should not drive today's approach."
Bessent stopped short of making specific policy recommendations on bank capital or other prudential requirements, but signaled a willingness to reexamine standards like the supplementary leverage ratio — a key measure of a bank's Tier 1 capital relative to its total leverage exposure. While intended as a safeguard, he noted that in some cases, the ratio has become a binding constraint on firms.
"Treasuries are not treated as such when the leverage restriction is applied [and] some have suggested that risk-free exposures, like central bank reserves and short-duration Treasuries, should not be capitalized even under a risk-insensitive leverage capital restriction, while others have suggested an adjustment to the leverage restriction buffer," Bessent said. "Rigorous analysis must be applied to these regulations if we are to appropriately supervise and regulate our banks."
Bessent said he aims to tailor regulation by shifting supervisors' focus to material financial risks rather than procedural exercises. Pointing to reported supervisory failures at the Fed, he argued that regulators must take a more proactive approach, citing the Fed's
"As the Fed's review noted, its supervisors did not fully appreciate Silicon Valley Bank's vulnerabilities as it grew in size and complexity," Bessent said. "When risks were identified, they did not take sufficient steps to ensure that SVB fixed those problems quickly. The result was the third largest bank failure in United States history. It was a supervisory failure."
Bessent also said he plans to use his power as head of the Financial Stability Oversight Council — a role earmarked for the treasury secretary — as well as the President's Working Group on Financial Markets to drive change in regulatory approaches.
Bessent said he will use his authority as head of the Financial Stability Oversight Council and the President's Working Group on Financial Markets to drive regulatory reform.
He highlighted the administration's progress in making regulatory agencies more accountable to the president's agenda, pointing to a Trump-era executive
Bessent also emphasized the need to reduce regulatory burdens on community banks, arguing that small firms are bogged down by reporting requirements that add little value in mitigating material financial risks.
"Regulatory rating systems have suffered from mission drift as regulators apply subjective standards [and] productive and synergistic mergers are often slowed due to immaterial supervisory issues," he said. "Regulations should serve to ensure the safe and soundness of U.S. banks, drive affordability across goods and services, and facilitate economic growth … deleveraging the public sector and re-leveraging the private sector begin and end with smartly reinvigorating our regulated financial institutions."
Bessent outlined the Trump administration's international economic vision, stressing the need to rebalance global trade relationships to better serve American workers and businesses. He criticized past policies for prioritizing global stability over U.S. economic prosperity, arguing that America has long acted as a consumer of last resort and security guarantor without receiving fair compensation.
"The result was the United States provided a source of massive demand and acted as arbiter of global peace — but did not receive adequate compensation," he said. "For example, today, the United States finds itself subsidizing the rest of the world's underspending in defense. The United States also provides reserve assets, serves as a consumer of first and last resort, and absorbs excess supply in the face of insufficient demand in other country's domestic models."
Bessent explained that his administration's "America First" trade policy aims to correct trade imbalances by enforcing tariffs, countering unfair practices like currency manipulation and intellectual property theft, and ensuring that allied nations assume greater financial responsibility for their own security. He framed these actions as essential steps toward creating a stronger, more stable global economic system where all parties contribute fairly.
"Burden sharing is not a matter of offloading risk, but a matter of all benefiting parties having interest in the system," he said. "This shared interest ultimately strengthens the international system, as the costs of disruption outweigh any benefits of dissolution."
Bessent criticized the sanctions imposed on Russia during the Biden administration, calling them too weak. He stated that his administration would maintain enhanced sanctions and would not hesitate to take stronger actions if they help end the war in Ukraine.
"This administration has kept the enhanced sanctions in place and will not hesitate to go 'all in' should it provide leverage in peace negotiations," he said. "Per President Trump's guidance, sanctions will be used explicitly and aggressively for immediate maximum impact. They will be carefully monitored to ensure that they are achieving specific objectives."
Bessent also detailed the administration's aggressive new sanctions approach, particularly its "maximum pressure" campaign against Iran.
Moving forward, the White House plans to use sanctions as a strategic tool for immediate and measurable impact, Bessent said. With respect to Iran, the goal is to reduce oil exports to previous low levels by dismantling the regime's shadow financial networks and oil smuggling operations.
"I know a few things about currency devaluations. If I were an Iranian, I would get all my money out of the rial now," he said. "We will close off Iran's access to the international financial system by targeting regional parties that facilitate the transfer of its revenues. Treasury is prepared to engage in frank discussions with those countries. We are going to shut down Iran's oil sector and drone manufacturing capabilities."
In a question and answer section with broadcaster Larry Kudlow following his remarks, Bessent addressed concerns over tariffs and their potential inflationary impact, explaining the administration's strategic approach to trade policy.
He emphasized that tariffs are part of a broader, holistic economic program and that some adjustments could be made to mitigate any immediate inflationary effects. Bessent acknowledged that the economic landscape might require some price increases.
"We could get a one-time adjustment," he said. "Across the continuum, I'm not worried about it."
