Policy Backgrounders

Deregulation Reshapes Financial Oversight

December 04, 2025

The Administration has advanced a deregulatory agenda across the financial regulators with the goal of enabling traditional financial institutions to complete more effectively with alternatives including private credit and private equity. However, some observers have expressed concern that these steps could increase systemic risk and harm consumers.

• For businesses and financial institutions, the deregulatory environment may offer greater flexibility, lower compliance costs, and faster regulatory approval timelines.
• The SEC has sought to reduce required reports and disclosures, limit shareholder proposals, and limit shareholder lawsuits. Banking regulators have also sought to ease certain capital standards and permit greater linkages between crypto firms and banks.
• The agencies’ actions have also specifically attempted to address concerns about debanking and reverse regulations related to climate risk.
• Firms should carefully monitor regulatory developments – including evolving state and international standards, which may diverge from US policy and increase regulatory complexity. Further deregulation is expected to continue.

Private Markets Are the New Public Markets

Observing shifts in the structure of US capital markets in the last several decades, financial writer Matt Levine frequently states that private markets are the new public markets. Indeed, across many metrics, key financial activities have shifted away from traditional financial institutions – including banks and public exchanges – and toward alternatives – including private credit and private equity. For example, the number of publicly traded companies in the US has declined by 50% since 1996, and the share of firms going public within seven years of their first financing round has plummeted. Similarly, the private credit market has grown substantially in recent years, increasing from $46 billion in 2000 to about $1 trillion in 2023, far outpacing the rate of growth for traditional bank business loans.

A variety of factors have driven this shift –the National Securities Markets Improvement Act of 1996, for example, made it easier for private funds to raise large amounts of capital, negating the need for growing firms to go public. Some stakeholders, including the chairman of the Securities and Exchange Commission (SEC), argue that increasing regulatory burden discourages initial public offerings, though other research challenges that narrative. Reforms following the 2008 financial crisis, such as the Dodd-Frank Act and Basel III, also reduced banks’ risk tolerance and certain forms of corporate and leveraged lending.

This evolution has prompted policymakers to confront difficult questions – namely, whether tighter regulation of the traditional financial system has constrained its competitiveness relative to less regulated alternatives, and whether the rapid expansion of private markets could be creating new, less visible sources of systemic risk.

Agency Deregulatory Efforts

Responding to concerns about regulatory burden on emerging firms and on banks, the Trump administration has advanced broad deregulatory efforts across financial regulators, including the SEC, the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC), and the Federal Reserve (Fed).

Securities and Exchange Commission

In a recent interview, SEC Chairman Paul Atkins outlined three priorities for reducing the regulatory burden that he believes discourages firms from issuing IPOs: (1) reduce required reports and disclosures, (2) limit shareholder proposals, (3) limit shareholder lawsuits. To that end, the agency has taken a variety of steps to implement these priorities. The chair has expressed interest in shifting from a quarterly to semiannual reporting schedule, which would align the US with other jurisdictions including the United Kingdom and European Union. The agency is also moving to amend or eliminate a variety of existing or proposed disclosure requirements on issues ranging from executive compensation to climate impacts. The agency has also withdrawn fourteen outstanding proposed rules. The SEC also announced on November 17 that it would no longer provide opinions through no-action letters for most shareholder-proposal exclusions, shifting more discretion to companies for determining whether to exclude shareholder proposals. Last month, the SEC announced a policy change that will make it easier for firms to include mandatory arbitration clauses in their registration statements. The SEC has also eliminated about 15% of its workforce, and its proposed budget requests less funding for examinations and enforcement.   

Federal Banking Regulators

In recent months, the Federal banking regulators – the OCC, Fed, and FDIC – have taken broad steps to reduce what some view as unnecessary regulatory burden and supervisory overreach. In March, the FDIC rescinded a 2024 bank merger policy statement that some industry groups argued introduced additional uncertainty into the bank merger process. In June, the agencies requested comment on a proposal to ease certain capital standards to remove barriers to firms engaging in low-risk activities. In July, the agencies proposed rescinding a controversial 2023 revision to the rules implementing the Community Reinvestment Act (CRA), which industry groups argued was too complex and costly and expanded CRA obligations beyond Congressional intent (which would be a key point in any litigation given the Supreme Court’s decision in Loper Bright Enterprises removing deference to agencies’ interpretation of rules). In October, the banking agencies announced the withdrawal of guidance outlining principles for managing climate-related financial risk.

The OCC and FDIC jointly issued a proposed rule that would prohibit the use of “reputational risk” to justify an enforcement action, which some have alleged regulators have used as a pretext for directing financial institutions to deny access to banking services – often called “debanking.” The Fed separately announced in June that reputational risk would no longer be a component of its bank supervision program. The OCC additionally issued a statement noting that the agency would evaluate “a bank’s past record and current policies and procedures [regarding] politicized or unlawful debanking” when assessing licensing filings and determining the bank’s CRA rating. The agencies also withdrew guidance for large banks outlining principles for managing climate-related financial risk. The OCC and FDIC also released a notice of proposed rulemaking that would focus supervision efforts on “material financial risks” rather than broader governance or reputational concerns. The Fed took a similar step in the form of supervisory instructions for bank examiners and issued a request for comment on a proposal to publicly release the stress testing models by which the Fed would evaluate the largest US banks. This step had long been sought by major bank trade associations and was the subject of several lawsuits. The Fed has also announced a 30% staffing cut to its supervision division, following similar actions by the FDIC and OCC.

Targeted Initiatives: Digital Assets and Consumer Protection

Beyond broad deregulation, the Administration has targeted specific policy areas — notably digital assets and consumer finance — where it contends prior regulation stifled innovation and stifled business activity. 

Crypto Oversight

In April, the FDIC and FRB withdrew two previous statements regarding the management of crypto-asset risks in banking organizations. The first – issued in January 2023 – discouraged banks from engaging directly with crypto-asset firms, emphasizing that such activities were “highly likely to be inconsistent with safe and sound banking practices.” The second – issued in February 2023 – warned banks that deposits held on behalf of crypto firms could be subject to rapid outflows and thus create liquidity risks for banks. In May, the OCC reiterated that banks may provide crypto-asset custody and execution services to customers, and the banking agencies jointly issued a statement in July seeking to clarify supervisory expectations for banks providing custody services for crypto-assets. In October, the OCC issued an interpretive letter stating that national banks may hold crypto-assets on their balance sheet for the purpose of paying network fees on blockchains to facilitate otherwise permissible activities.

Consumer Financial Protection Bureau

The Administration has also sought to dramatically restructure the Consumer Financial Protection Bureau (CFPB), which the President has argued imposes excessive regulatory burdens on financial institutions. Soon after the Inauguration, the acting CFPB director closed the agency’s headquarters and ordered staff to stop work. The agency also sought to fire or reassign a significant portion of its workforce, reduce its budget, and consolidate its supervision and enforcement divisions. Many of these actions face ongoing litigation, though recent press reports indicate that all remaining staff will be furloughed by the end of the year and pending cases will be transferred to the Department of Justice. The CFPB has also rescinded several previous rulemakings and withdrawn guidance related to a variety of topics, including fair lending, credit card fees, and consumer data. Enforcement actions have also dramatically decreased.

Conclusion

Taken together, these regulatory actions reflect the Administration’s broader policy priorities – emphasizing deregulation alongside targeted initiatives related to climate risk, debanking, and digital assets. However, some observers expressed concern that the steps could increase systemic risk and harm consumers. For businesses and financial institutions, the deregulatory environment may offer greater flexibility, lower compliance costs, and faster regulatory approval timelines. Financial institutions are likely to benefit most directly, especially in areas such as capital management, consumer compliance, and crypto-asset custody. Firms should carefully monitor regulatory developments – including evolving state and international standards, which may diverge from US federal policy and increase regulatory complexity.