Why is bank enforcement declining?

Enforcement of rules by bank regulators has declined, as measured by formal enforcement actions. The decline in enforcement has occurred across administrations, in contrast to the narrative of a pendulum of enforcement that swings between Democratic and Republican administrations. Instead, the data show a stepwise decline in enforcement in which subsequent administrations either maintain lower enforcement rates or continue to decrease enforcement. Enforcement decline varies substantially by regulator: the sharpest decline is at the Federal Reserve (Fed), where formal enforcement actions have fallen by nearly 50 percent since Covid.

This post explores the data on bank enforcement, notes the discrepancy between agencies, which transcends Democratic and Republican leadership, and points to a serious decrease in formal enforcement actions, particularly at the Federal Reserve. It starts by describing the differences between regulation and supervision and why a correlation between increased regulation and greater enforcement actions is not a given. It then lays out the data from 2015 through 2025. The post concludes offering ideas on why formal enforcement actions are falling, what that means about the future of supervision in both the deregulatory Trump administration and future potentially re-regulatory administrations.

Supervision and regulation

Too often, regulation and supervision are used as synonyms when they are quite different. Regulations are the rules banks must follow. Supervision involves applying those rules. The range of supervisory actions is broad, containing main tools, and spanning private discussions to public actions. A public formal enforcement action is one of the most aggressive forms of supervision and one of the few that can be tracked across the industry. Enforcement actions result when banks and bankers violate the regulations, are caught, generally through supervision, and the regulator chooses to resolve the issue with formal public actions.      

The number of enforcement actions is related to how often banks are getting caught breaking the rules, to the point that the regulator decides to take a formal, public action. The number of enforcement actions and the stringency of regulation are not necessarily related. Enforcement actions could be higher in an era of deregulation, if regulators are more carefully enforcing the rules, banks are more willing to violate rules, and/or regulators are deciding to act more aggressively when violations are found. Enforcement actions could be lower in periods of greater regulation if banks are following the rules and regulators are less active in policing them or are less stringent in applying punishment.

The analogy in our lives is that regulations are the laws, supervision is the police who enforce them, enforcement actions are the arrests and tickets that result when you are caught, and the cop (and possibly district attorney) decides to move forward (as opposed to warnings or looking the other way). The number of cases in court may rise or fall as laws are liberalized or tightened, but they can move in opposite directions. Many oppose the police analogy, such as former New York Federal Reserve Bank president Bill Dudley, who thinks of the Fed as the fire warden, preventing a fire from burning down the block. In that analogy, enforcement actions are code violations the fire department finds and decides to file formally rather than handle informally. Either way, enforcement actions are a measure of actions taken by supervisors on banks they believe are not acting appropriately. Because these are public, enforcement actions are one of the few ways the public has insight into the state of supervision.

Much of Supervision is critically hidden from public view. Most supervisory actions remain between banks and their supervisors in a host of confidential and private communications, with terms like “matters requiring attention” and “matters requiring immediate attention.” Only when a problem is severe enough is it elevated to a formal enforcement action, which is released publicly. As Peter Conti-Brown and Sean Vanatta, two of the scholars who have been most passionate about supervision as distinct from regulation, point out, “Supervision is the mostly secret process of managing the public and private responsibilities over the risks that the financial system generates.”

Public enforcement actions are a massive data point leaving a trail to track one metric of supervision. That is the track we trace. When we generalize that supervision has become laxer, we acknowledge an assumption that there may be a hidden shift in which enforcement is still occurring at an equal level but resulting in fewer public actions. However, that itself is a type of supervisory laxity, akin perhaps to teenagers being caught with alcohol given warnings instead of arrests that leave a written record.

Supervisory trends over time by regulator

The data come from each agency’s public list of enforcement actions for the 11 years from 2015 to 2025. We begin in 2015, seven years after the financial crisis and four and a half years after the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) was passed in 2010. By this time, new regulations have been published, and prior supervisory actions regarding misconduct committed in the lead-up to the great financial crisis of 2007-2009 have largely ceased.

We focused on the three prudential bank regulators: the Comptroller of the Currency (OCC) who supervises national banks and thrifts; the Federal Reserve who supervises state-member banks and bank holding companies; and the Federal Deposit Insurance Corporation (FDIC) who supervises state non-member banks. This time period captures multiple administrations: the last three years of Obama, the first term of Trump, the Biden presidency, and the first year of Trump’s second term. It includes the passage of deregulatory legislation (S. 2155) that rolled back some of Dodd-Frank. However, as discussed earlier, deregulation does not necessarily mean a reduction in supervisory actions, particularly as S. 2155 provided greater regulatory discretion on the enforcement of a variety of rules. Until Trump’s second term, bank regulators served independent fixed terms that did not coincide with the administration. Thus, we focused more on the financial regulator in charge than the President, although the data can be sliced differently (we do not see a change in the results). There was not enough data on the new regulators Trump appointed in his second term yet to draw any firm conclusions, although the trends observed appear to be holding.

During this period, the number of banks each regulator is in charge of declined as the overall number of banks fell by more than 30%, from 6,182 at the end of 2015 to 4,336 at the end of 2025. The OCC, which regulates nationally chartered banks saw the steepest reduction with 36% of its banks departing, while the FDIC saw a decline of 31% and the Federal Reserve the smallest decline at only 16%.

The charts below detail the change in the number of enforcement actions by bank regulator, with averages for the tenures of the regulator in charge. Enforcement actions decline across the board, although the declines at the Federal Reserve are the most. Enforcement actions at the Fed have fallen by more than 58% since Fed Governor Tarullo’s tenure as the de facto vice chair of supervision. The Fed’s decline in enforcement is even more pronounced as it had the smallest decline in the number of institutions it supervised over the time period, losing less than half the share of banks that the OCC lost.

Contrary to a popular narrative that Biden was “tough on banks,” there was no increase in enforcement actions at any of the three regulators over the terms of the Biden-appointed heads as compared to their predecessors during the first Trump administration. In fact, all three regulators had a decline in enforcement actions under those Biden-era regulators as compared to their immediate predecessors, as measured by average annual enforcement actions over the life of each appointee.

Covid: A moment of change?

The charts below show the average number of enforcement actions pre- and post-pandemic, factoring out the “covid era” entirely. Before and after the pandemic, there is a decline of under 50% in enforcement actions at the Federal Reserve. The reduction at the FDIC was about half, 25%, although starting from a much higher base. The OCC has been mostly flat (4% increase), although that increase is almost entirely due to one year (2024), which saw a massive spike in enforcements as described below.

As stated above the number of banks in America declined over this time period. Bank mergers constitute much of the change, while some is due to bank failure. For this analysis, it is not clear if the number of banks or total assets in the system is more important: if ten banks merge into five, should the number of enforcement actions change? If one controls for the number of banks each agency regulated, then the OCC saw an increase in enforcement, the FDIC appears to be relatively flat, and the decline in enforcement actions at the Federal Reserve is even more pronounced compared to its peers.

The decline in Fed enforcement occurred during the period when one of the largest banks the Fed regulated, Silicon Valley Bank (SVB), was exploding its balance sheet and causing what the Federal Reserve Board belatedly decided was a risk to financial stability that required emergency bailouts. The Fed’s review of its role in SVB concluded, “the supervisory approach at Silicon Valley Bank was too deliberative and focused on the continued accumulation of supporting evidence in a consensus-driven environment.”

Given the lack of enforcement actions against a large, growing, and financially unstable bank, perhaps this insight applies far more broadly across the Federal Reserve’s supervisory staff. There are two possibilities. First, banks regulated by the Fed have had a substantial decrease in non-compliance that is unique relative to national and state-chartered non-member banks (e.g., banks regulated by the OCC and the FDIC). The second is that the Fed has reduced its level of supervision, either willfully by not elevating problems to the level of an enforcement action, or by ignorance in failing to find such problems.

The decline in enforcement activity at the OCC is at a substantially slower rate than the Fed and FDIC, and with more variability year by year. Annual enforcement numbers have gradually fallen from their mid-2010 levels into the early-2020s, with the downward trend in their rolling average reinforcing this decline. There do appear to be spikes upward in even years, with a substantial spike in enforcement in 2024. We examined potential drivers for the 2024 spike, including looking at enforcement action by type, but found no clear driver. The 2024 spikes appear to have been short-lived, as 2025 returned to the original downward path. The 2024 spike does result in the OCC being the only agency to have not decreased enforcement actions in the post-Covid era, or if controlling for the number of banks, it has increased.

The FDIC shows a steeper, more sustained decline in enforcement than OCC, but substantially less of a decline than the Fed over the same period. FDIC enforcement levels have edged upward in recent years, indicating a halt to the decline and perhaps a return to a slightly higher state. Still, FDIC enforcement actions remain significantly below their mid-2010s highs. As with the other regulators, the decline spans multiple leadership tenures and transcends party lines, suggesting a broad shift in enforcement rather than any specific policy choice or administrative decision.

Conclusion

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. Given banks’ ability to change federal regulators between the FDIC and the Fed, and the relative gain of the Fed in regulating a greater percentage of state-chartered banks, one wonders if the Fed is winning a battle of regulatory arbitrage through supervisory laxity. The Fed also has regulatory authority over bank holding companies, including some of the largest national banks that the OCC primarily regulates. The OCC, who also regulates many smaller national banks, has had the lowest decline in enforcement, further highlighting the Fed’s outlier status. The banking crisis of the spring in 2023, focused on SVB, a bank which was under-supervised by the Fed’s own admission, is evidence of the potential negative consequences from lax supervision by the Federal Reserve.

This data makes the Fed’s decision to provide new supervisory principles that appear to raise the threshold for enforcement actions even more perplexing. Given the sharp decline in the Fed’s enforcement actions over the last decade, relative to its peer regulators, and the failure of one of the largest banks the Fed regulates (SVB), one would suspect the Fed would be reflecting as to whether its enforcement has grown too lax. Instead, the new supervisory principles send the message that front line examiners should have higher standards for enforcement actions and give greater deference to banks’ own conclusions about whether they have remedied the problems causing enforcement actions.

Finally, this data cuts against the common narrative that financial regulation is like a pendulum, swinging up in times of Democratic administrations and down in times of Republican ones. If this narrative were true, one would expect a sharp downswing in enforcement during the Trump administration(s) and corresponding upswing under Biden. While there is a change in pattern, it is more akin to a ratchet-level phenomenon whereby the decline in regulation under the first Trump levels off under Biden. The Covid recession, coupled with the spring 2023 bank runs, makes it difficult to generalize with confidence that this pattern is permanent. Furthermore, there are lag times as regulators change with administrations. However, controlling for the regulator in charge, we see no evidence of a pendulum. Perhaps it is time to put to bed the physics analogy, which incorrectly assumes symmetry, and a fixed, constant resting point.