A primary task of the Federal Reserve, separate from using monetary policy to set interest rates, is that it carries out bank “supervision”–which refers to taking a close look at a bank’s finances and record-keeping to be sure that the bank isn’t taking on too much risk. Often, this process is resolved by not giving the bank a top-level ranking in certain categories, but still saying that the bank financials are overall satisfactory. But when the situation at a given bank is more dire, the Fed has power to bring enforcement actions against the bank to require compliance. A look at the data leads Aaron Klein and Cameron Connell to ask: “Why is bank enforcement declining?” (Brookings Institution, July 8, 2026). They offer this figure on the number of enforcement actions brought by the Fed each year.
The story here is clearly not a standard “Democrats regulate, Republicans don’t” story. There’s a modest decline in Fed enforcement actions from the tail years of the Obama administration into the first Trump administration. Bu tthe big decline happens with the pandemic in 2020, and then continued through the Biden years and into the second Trump term.
Broadly speaking, there are two possible explanations for less enforcement. One is that there is less need for enforcement: in this case, perhaps the financial regulations imposed in the aftermath of the Dodd-Frank of 2010 have led to banks taking less risk, and so the regulators have less to do. The other possibility is that the bank supervisors aren’t looking closely enough or moving fast enough: for example, Fed bank supervisors were still gearing up to start enforcement actions against Silicon Valley Bank when a bank run drove the bank into insolvency in 2023. Without inside information into bank balance sheets and some combinatino of perfect foresight and perfect hindsight, it’s hard to prove which explanation holds a greater share of the truth.
But Klein and Connell come at the question from another direction. You see, the Fed does not supervise all banks, and is not the only regulatory agency that does bank supervision. Some banks and thrifts are chartered by the national government and regulated by the Office of the Comptroller of the Currency (OCC); the Fed supervised bank holding companies and some of the banks that are are chartered at the state level; and the Federal Deposit Insurance Corporation supervises banks chartered at the state level that do not choose to be members of the Federal Reserve system. The issue is that the patterns of enforcement actions for the OCC and the FDIC don’t match those of the Fed. Here’s what their number of enforcement actions look like over time.
The other two enforcement agencies see a decline in enforcement actions in the late 2010s, although it’s a considerably smaller decline for the OCC. However, the other agencies also see a rise in enforcement actions in the last few years, although it’s a bigger rise for the OCC. Klein and Connell sum up:
Enforcement actions against banks by federal regulators are declining. By this measure, bank supervision has become more lenient in the past decade. Declines in enforcement vary substantially between regulators, with the Federal Reserve standing out for substantially laxer enforcement. The Fed’s nearly 50% decline in enforcement actions since COVID leads one to wonder whether the banks they regulate are that much more compliant or whether the Fed is choosing not to issue formal enforcement actions. Given the natural similarity between the generally smaller, state-chartered banks the Fed and FDIC share authority over, it is hard to imagine that the state member banks the Fed regulates are behaving that differently than the state non-member banks the FDIC regulates. Nor that issues are being resolved prior to the need for an enforcement action at that much of a different rate.
