US financial regulators, including the Federal Reserve, FDIC, and OCC, are implementing the most significant overhaul of bank supervision since the 2008 financial crisis. This revamp aims to narrow examiners' focus to "material financial risks," moving away from an emphasis on paperwork, procedural deficiencies, and minor operational issues. The change is driven by arguments that past supervision was overly broad and diluted the message on core financial threats.
A key aspect of this shift involves moving away from supervising banks based on "reputational risk," a metric that banks often criticized as subjective and giving examiners too much discretion. Additionally, the new approach limits the use of "matters requiring attention" (MRAs), which are confidential directives for banks to correct deficiencies. Under the revised framework, MRAs will only be issued for issues involving material financial risk, with less serious concerns now categorized as nonbinding "observations." The number of MRAs and MRIA's issued by the Fed has significantly declined, from nearly 1,000 in 2024 to less than half that in 2025.
This new, leaner approach is already evident in enforcement statistics. The US Securities and Exchange Commission filed 456 enforcement actions in the 12 months to September 2025, the lowest in two decades. Similarly, the Commodity Futures Trading Commission saw a drop in new enforcement actions from 58 in 2024 to just 13 a year later, with penalties significantly reduced from $17.1 billion to less than $1 billion. While proponents, including President Donald Trump's regulators, believe this streamlines supervision and prevents overreach, critics warn it might reduce regulators' ability to detect problems before they escalate into larger threats, potentially allowing governance failures and weak controls to go unaddressed until they pose immediate financial risks.
