Trump Regulators Overhaul Bank Supervision, Slash Oversight Staff

Federal banking regulators under the Donald Trump administration are executing the most significant overhaul of bank supervision since the 2008 financial crisis. The Federal Reserve, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation are refocusing examinations on material financial risks rather than administrative, procedural, or governance issues. The changes include removing reputational risk as a supervisory metric and restricting matters requiring attention to significant financial concerns, with minor issues now receiving nonbinding observations.

Fed Vice Chair for Supervision Michelle Bowman is leading the effort, which has already curtailed the use of matters requiring attention and reduced the scope of bank examinations. The Federal Reserve has also announced a 30% reduction in regulation and supervision headcount and is proposing reforms to the confidential CAMELS rating system to prioritize objective financial data over subjective management assessments. Randall D. Guynn, a former Wall Street attorney recently appointed as Director of Supervision and Regulation, is overseeing implementation.

Wall Street banks are privately urging the Federal Reserve to formalize the softer supervisory regime through explicit written assurances and formal regulatory changes to prevent future Democratic administrations from reversing the shift. Banks are seeking to resolve legal ambiguities around the new nonbinding observations. The Fed is also increasing reliance on other agencies' work and banks' internal audits to reduce duplication. Supporters argue the changes reduce compliance costs and regulatory uncertainty, while critics warn that weakening oversight of governance and operational lapses could jeopardize long-term financial stability.