On June 6, Fed Governor Michael Barr delivered remarks, warning that, in his view, recent bank regulatory and supervisory changes could weaken bank safety and soundness and increase financial stability risks. Governor Barr argued that deregulation may provide a short-term boost to lending, market activity, and profits, but may also increase longer-term financial system vulnerability and the risk of crises. Barr criticized a series of recent regulatory and supervisory actions, stating that the Fed and other banking agencies had lowered capital requirements through proposals and rulemakings involving stress tests, the enhanced supplementary leverage ratio, Basel III implementation, and the GSIB surcharge (previously covered by InfoBytes here). Barr said those proposals would reduce aggregate capital requirements for the largest banks by 6 percent, or about $60 billion, and stated that the eight GSIBs hold about 60 percent of banking-sector assets.

Further, Barr contended that supervision had weakened through changes to large-bank ratings, reduced emphasis on risk management, curtailment of matters requiring attention, lower staffing levels at the Board, and reduced horizontal reviews. Barr criticized declines in consumer protection oversight and said weakening protections against fraud, excessive fees, predatory lending, and unfair or discriminatory practices could harm consumers and, in some cases, destabilize the economy. Barr cited research on prior financial crises and bank capital, arguing that stronger capital and liquidity requirements reduce the probability and severity of crises and that current U.S. bank capital requirements are near the low end of the range that some research identifies as optimal. Barr further argued that regulators should maintain and improve bank regulation rather than deregulate banks to compete with private credit and other nonbanks, citing banks’ exposure to nonbanks through credit commitments that reached more than $2.6 trillion in the second half of 2025.