Treasury's Bessent reviews deficit progress, aims for easing restrictive community banking rules

[President Trump Signs Executive Order In The Oval Office]

U.S. Treasury Secretary Scott Bessent noted progress made on reducing the government's fiscal deficit for this fiscal year, ending Sept. 30. The deficit-to-GDP will have fallen to 5.9% from 6.5%, according to the Congressional Budget Office, he said on Thursday.

He said the U.S. Treasury will release its budget statement after the government shutdown ends.

"I'm very optimistic that 2026 will be a very good year across the corporate and consumer economy," he said at the Federal Reserve's Community Bank Conference in Washington, DC.

He also recounted the Trump administration's change in tone to regulation and its agenda items for banking regulation, and community banking, particularly.

"We have worked hard to empower community banks to take control of their own future," Treasury Secretary Scott Bessent said on Thursday.

"To expand opportunities for all American, the banks that serve Main Street must have the same chance to succeed as the banks that serve Wall Street," he said However, "the post-crisis regulatory framework has become a threat to the community bank model," he added, noting that since 2010 the U.S. has lost 3,600 community banks

Bessent said he has called for a fundamental re-set of financial regulation that "strengthens both the shop floor and the trading floor." He envisions what he calls "parallel prosperity, where Main Street and Wall Street grow together."

"The Main Street revival starts with a community bank comeback," he said.

"Going forward, Treasury will continue to drive reforms to improve regulatory tailoring, refocus the culture of supervision, and modernize our illicit finance regulation," Bessent said. Specific priorities will include reforms to the rating system, new processes for monitoring examiners' compliance with supervisory policy, a mechanism for independent appeals of supervisory criticisms, coordination to avoid duplicative examinations by different regulators, and review of the core platform providers, including contact terms that prevent community banks from innovating in the future."

Treasury has supported efforts to modernize the deposit insurance framework, he said. "I'm encouraged to see emerging bipartisan support for increasing FDIC insurance limits on noninterest-bearing transaction accounts." Bessent said [https://www.youtube.com/watch?v=Su5PQO0jY0U] a final amount hasn't been decided, but he's optimistic new legislation will succeed.

"My worry with private credit is it can be very cyclical," he said.

UPDATED AT 9:30 AM ET: Inflation should be factored in when considering regulations, he said. He thinks there will likely be a need for "a big catchup" on asset thresholds, with a "substantial increase" in regulatory levels.

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