Bessent Pushes Deregulatory, Growth-Focused Pivot in Financial Stability Oversight

‘Prophylactic’ financial regulatory policies, Bessent said, generally ‘do not account for their overall impact on economic growth.’

Secretary of Treasury Scott Bessent in the Oval Office of the White House on Nov. 21, 2025. Jim Watson/AFP via Getty Images

Treasury Secretary Scott Bessent has announced a sweeping overhaul of the government body responsible for monitoring emerging threats to the nation’s financial system, pushing for an approach more oriented toward economic growth.

In an introductory letter accompanying the Financial Stability Oversight Council’s (FSOC) annual report, published Dec. 11, Bessent wrote that the council will pivot away from tightening what he called “prophylactic” regulations. Instead, the FSOC will prioritize removing regulatory constraints that he said may be holding back the nation’s economic potential.

“Economic growth is critical to financial stability,” Bessent wrote in the letter. “Yet prophylactic financial regulatory and supervisory policies generally do not account for their overall impact on economic growth.”

To maintain both “economic security” and “the nation’s standard of living,” Bessent said, the FSOC will examine whether parts of the U.S. financial regulatory framework impose “undue burdens and negatively impact economic growth, thereby undermining financial stability.”

The FSOC was created by Congress in 2010, in the aftermath of the 2008 global financial crisis, to help detect and respond to the kinds of threats that contributed to the downfall of major Wall Street firms and the deepest economic downturn since the Great Depression.

As Treasury secretary, Bessent chairs the council.

Bessent’s letter outlines several new FSOC working groups, including teams devoted to market resilience, household resilience, and artificial intelligence (AI). There will also be a new workstream to coordinate with other agencies on threats such as cyberattacks and operational disruptions.

The AI workgroup, according to Bessent, will focus both on how to encourage regulators’ use of AI tools and to identify regulatory obstacles that may be slowing “responsible adoption” of AI technologies in the financial service sector.

The shift at the FSOC aligns with the Trump administration’s broader push to cut wasteful spending and unnecessary regulations. The Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation, both having seats on FSOC, have already moved this year to reverse several Biden-era rules and accelerate efforts related to digital assets and supervisory reform.

The Federal Reserve, which is also represented on the council, has similarly changed the way it oversees banks. In new policy guidelines released in November, the Fed instructed examiners not to “become distracted” by anything other than a firm’s “material financial risks.” It also tightened rules on when examiners may issue warnings known as Matters Requiring Attention, instructing that such notices must not be written in “vague or overbroad language.”

The new direction laid out in Bessent’s letter marks a significant departure from the Biden administration, which emphasized tighter oversight as well as addressing the potential risks associated with climate change. Under Treasury Secretary Janet Yellen, the FSOC created the Climate-related Financial Risk Committee and pursued guidelines urging banks and regulators to incorporate climate change into their risk assessments. Those guidelines were formally rescinded by Bessent in November.