By Rebecca Ungarino
Federal regulators' approach to U.S. bank oversight under the Trump administration is negative for bank creditworthiness because the regulators' "new philosophy" around supervising lenders is encouraging firms to take on new risk, Moody's Ratings said in a report.
Regulators have often framed proposed changes to bank supervision as a way to reduce compliance responsibilities for small firms, correct for what they view as excessive post-2008-09 financial crisis regulation, and promote risk-taking in the name of economic growth.
"But increased risk-taking by banks is definitionally negative for bank creditors, especially if it is not accompanied by a commensurate increase in capital, strong risk management and controls," and effective oversight by companies' boards and management teams, Moody's said.
Together, officials appointed by President Donald Trump at the Federal Reserve, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corp. -- the three main U.S. bank regulators -- have set out to re-evaluate longstanding rules and requirements in what amounts to the largest overhaul to those frameworks in 15 years.
Finalized and proposed changes are wide-ranging, and regulators' rule-making has generally fallen in line with bank lobbyists' wishes.
For instance, regulators are seeking to water down requirements for capital that banks must hold on their balance sheets -- a cushion to safeguard against economic turmoil and absorb potential losses -- and change stress tests banks must undergo to assess their health.
Banks for years have railed against stress tests' frameworks and certain aspects of capital requirements. Regulators have also sought to speed up review processes for bank mergers and acquisitions.
The latest slate of planned changes arrived late last week. The three regulatory agencies introduced proposals, including a much-anticipated proposal on capital rules.
"The result will be more efficient regulation and banks that are better positioned to support economic growth, while preserving safety and soundness and financial stability," said Michelle Bowman, the Fed's vice chair for supervision and a former community banker who has been key to remaking bank regulation.
Because lenders face intense competition from less regulated firms such as private credit funds and financial-tech start-ups, allowing banks to innovate is critical to their credit strength, Moody's wrote.
"But innovation can also increase a bank's risk profile significantly unless pursued within an appropriate risk-management framework," the report said, adding that regulators emphasizing a focus on financial risk over banks' internal procedures could lead to weaker internal controls.
Write to Rebecca Ungarino at rebecca.ungarino@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
March 24, 2026 18:18 ET (22:18 GMT)
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