Secretary of the Treasury Scott Bessent appeared before the United States Senate Banking Committee to discuss the Financial Stability Oversight Council’s (FSOC) 2025 annual report. In his opening remarks, Bessent thanked FSOC members for their work and highlighted the administration's focus on economic growth.
Bessent stated, "Since Day One, President Trump has focused on building Parallel Prosperity—an era of economic expansion where Wall Street and Main Street grow together. To that end, Treasury has tirelessly pursued pro-growth policies to unlock the potential available to all Americans when they are free to save, invest, build businesses, and drive their own economic destinies. The Financial Stability Oversight Council plays an important role in delivering on this agenda."
He criticized past regulatory approaches as being reactive rather than preventative. "Too often in the past, we have seen regulation by reflex. Rather than preempting crises, regulators have frequently reacted to them after the fact. They have played the role of a hazmat cleanup team instead of preventing dangerous spillovers in the first place," Bessent said.
Bessent also addressed what he described as misplaced priorities under previous leadership: "Regulation by reflex has led to a regulatory myopia that has undermined safety and soundness. Under President Biden, the bank regulators preoccupied themselves with 'reputation risk,' 'climate-related financial risks,' and other risks with no clear nexus to safety and soundness. At the same time, they centered supervision on management and other governance matters that distracted examiners and banks’ risk managers from the real risks to safety and soundness. The result, predictably, was the second, third, and fourth largest bank failures in U.S. history in 2023."
He warned against excessive regulation leading to stagnation: "Besides undermining safety and soundness, regulation by reflex has driven excessive regulation. That can lead to economic stagnation. And economic stagnation is, itself, a threat to financial stability."
Bessent outlined his view on effective regulatory policy: "In calibrating regulations, federal agencies must avoid the temptation to create a zero-risk financial system, which would result in what others have called, 'the stability of the graveyard.' FSOC should aim to identify vulnerabilities that could lead to systemic crises and encourage the private sector to mitigate those risks before recommending additional regulation. FSOC should also work with its members to support efforts to avoid or pare back existing regulation that stifles pro-growth lending, capital formation, and innovation. And the best way to achieve these goals is by centering economic growth and economic security at the heart of FSOC’s agenda."
He further emphasized: "Promoting economic growth and economic security is essential to ensuring financial stability. Economic growth strengthens household, business, and financial-institution balance sheets, creating capital buffers that reduce the risk of defaults and financial stress. And economic security reinforces domestic production capacity, raising living standards while reducing vulnerability to external shocks and supply-chain disruptions."
The annual report prioritizes four areas: Treasury markets; cybersecurity; regulatory modernization; and artificial intelligence (AI). On Treasury markets, Bessent noted ongoing efforts by member agencies through groups such as the Inter-Agency Working Group on Treasury Market Surveillance.
Regarding cybersecurity threats from nation-state actors and criminal groups targeting financial institutions and infrastructure, Bessent said FSOC supports expanded information sharing as well as joint monitoring exercises.
On regulatory modernization for banks and credit unions—especially community banks—he stressed reducing unnecessary burdens while enhancing transparency.
Finally addressing AI’s role in finance: "The Council is prioritizing the responsible use of artificial intelligence to strengthen financial stability. The Council is working with public- and private-sector partners including international counterparts to enhance system resilience while closely monitoring emerging risks."
Bessent concluded by highlighting changes made in this year’s report structure: "In this year’s report FSOC shifted away from its past approach where nearly every major market and financial sector was described as a financial stability vulnerability. By introducing a new structure centered on fostering economic growth and security we are tuning out the white noise to concentrate on issues that matter most for U.S. financial stability."
He ended his statement by inviting questions from committee members.
