Banking and Finance Law Daily Wrap Up, ENFORCEMENT ACTIONS—Bank supervision enforcement trends support a finding of increasing leniency, (Jul 8, 2026)

By Kathleen Bianco, J.D.

Over the last ten years, formal enforcement actions by federal bank regulators declined across administrations with the most noticeable drop at the Federal Reserve.

A pattern of declining formal enforcement actions against banks between 2015 and 2025 does not support the theory that bank supervision swings like a pendulum based upon the political leanings of an administration, a research paper by the Brookings concluded. The report found that federal bank regulators reduced the use of formal enforcement actions during the 10-year period and cited this decline as evidence of increasingly lenient supervision, particularly at the Federal Reserve. The findings rejected a partisan cycle in enforcement patterns and instead identified a sustained downward shift that persisted across multiple administrations and regulatory leadership tenures.

Regulation defines the rules governing bank conduct, while supervision governs how regulators apply those rules through a number of tools ranging from informal guidance to formal public enforcement actions. Formal actions represent one of the most severe and visible supervisory measures and arise when regulators identify violations and escalate them into publicly disclosed proceedings. Most supervisory activity remains confidential, limiting public visibility into enforcement intensity and making formal actions a primary observable metric. A decline in such actions reflects either improved compliance or reduced supervisory escalation.

Data from the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the Federal Reserve showed declining enforcement activity across all agencies, with the most significant reduction at the Federal Reserve. The pattern remained even after adjusting for a substantial decline in the total number of banks. The Federal Reserve maintained a relatively stable supervisory base compared to its peers yet exhibited the steepest drop in enforcement actions, intensifying its status as an outlier. Post-pandemic comparisons reinforced this trend, with enforcement actions at the Federal Reserve falling by roughly half, while other regulators showed smaller or inconsistent changes.

Supervisory practices at the Federal Reserve included a more deliberative and consensus-driven approach that delayed escalation of identified risks. This approach coincided with the rapid growth and subsequent failure of Silicon Valley Bank, where supervisory shortcomings by the Federal Reserve were acknowledged. The differing enforcement priorities between the Federal Reserve and other regulators raised competing explanations, including improved compliance among regulated institutions or a reduced willingness to issue formal enforcement actions. Comparable institutions across regulatory jurisdictions and the absence of similar trends at peer agencies undermined the compliance-based explanation. Continued declines, combined with supervisory principles that raise thresholds for formal actions and defer to bank remediation efforts, reinforced the assessment that supervisory enforcement has become less stringent despite potential risks to financial stability.

Companies: Brookings Institute

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