Key facts
- US financial regulators are reducing enforcement actions and supervisory warnings.
- The focus is shifting from process and policy breaches to crimes like fraud and market manipulation.
- The SEC filed 456 enforcement actions in the year to September 2025, a two-decade low.
- The Federal Reserve has halved the number of formal warnings (MRAs/MRIAs) issued to banks.
- Concerns exist that this approach could lead to declining standards and a return to 'Wild West' banking.
US financial regulators are significantly curbing their enforcement activities, signaling a shift away from punishing minor process and policy breaches towards focusing on substantial harm caused by crimes like fraud and market manipulation. This change, aligned with the Trump administration's broader deregulatory push, aims to boost economic growth and free up capital within the finance industry.
The effects of this new approach are already evident. The Securities and Exchange Commission (SEC) filed 456 enforcement actions in the 12 months leading up to September 2025, marking the lowest level in at least two decades, largely due to a reduction in resource-intensive standalone cases. Similarly, the Commodity Futures Trading Commission (CFTC) saw a sharp drop in new enforcement actions, from a higher number in 2024 to just 13 in 2025, with penalties also significantly reduced.
At the Federal Reserve, the issuance of formal supervisory warnings (MRAs/MRIAs) to banks has also declined dramatically, nearly halving in 2025 from nearly 1,000 in 2024. The central bank's internal ratings of large banks have also seen a dramatic improvement, with 81% now rated as "well managed" after a ratings system overhaul. The Fed's revised supervisory principles prioritize "material" financial risks and utilize non-binding "observations" as an alternative to formal warnings.
This "enforcement-lite" approach, while potentially beneficial for the finance industry, raises concerns about a potential decline in standards and a return to the 'Wild West' banking era seen before the 2008 financial crisis. Critics worry that focusing less on technical rule breaches could institutionalize a lax supervisory culture, potentially overlooking crucial reporting rules and communication safeguards that help prevent misconduct and embedded risks.