U.S. bank regulators outline rule rollback agenda for Congress

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Ciaran Ryan

8 hours ago

U.S. bank regulators outline rule rollback agenda for Congress — Bank rules under review

U.S. banking agencies are preparing to defend a broad push to ease post-crisis oversight as lawmakers review the direction of federal financial regulation. The planned testimony centers on arguments that narrower supervision and greater openness to new technologies can support economic activity without adding excessive risk to the banking system.

Highlights

Federal Reserve, FDIC, and OCC officials will testify to Congress Thursday on easing certain post-2008 bank rules, focusing on tailoring requirements to actual risks.
FDIC Chairman Travis Hill highlights a year-long agency shift toward prioritizing material financial risks rather than process-based compliance, citing punitive effects of stricter standards on banks' economic support role.
Regulators advocate enabling bank innovation in areas like blockchain and AI, while warning that advanced technologies also introduce new vulnerabilities requiring ongoing risk management.

Congress hearing on supervision changes

As reported by Reuters, senior officials from the Federal Reserve, Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency are set to appear before the House Financial Services Committee on Thursday to discuss efforts to revisit and soften a range of bank rules adopted after the 2008 financial crisis.

In prepared remarks posted Wednesday, Federal Reserve Vice Chair for Supervision Michelle Bowman says the central bank is trying to match requirements more closely to actual risk while preserving core safeguards. She says the Fed has found that examiners have flagged numerous bank deficiencies tied to procedure or documentation rather than genuine financial weakness.

FDIC Chairman Travis Hill says in prepared remarks that the agency has spent more than a year reshaping supervision to focus on material financial risks instead of process-driven compliance checks. The regulators argue that stricter standards introduced in recent years have become overly punitive and have limited banks' ability to support the wider economy.

Innovation push and sector implications

The officials also plan to tell lawmakers that financial regulation should give banks and nonbanks more room to pursue innovation, including the use of blockchain technology and artificial intelligence. Comptroller Jonathan Gould says in prepared testimony that regulators should facilitate responsible innovation rather than restrain it.

Even so, the agencies are also signaling that new technologies bring fresh vulnerabilities for the sector. Bowman says newer AI models have sharply accelerated the identification of weaknesses in the banking system, underscoring that the deregulatory push is being presented alongside continued attention to emerging operational and risk-management challenges.

Our earlier article on AI-related cyber resilience risks in UK banking explained how supervisors are increasingly focused on vulnerabilities that advanced models can uncover in lenders’ IT systems, and on the potential for hostile misuse. It also noted that, even as reforms to post-crisis safeguards are debated, regulators have warned against weakening capital and leverage requirements too far given the fast-evolving risk environment.

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