Too Big to Fail' Created 'Too Small to Succeed' — Nearly Half of U.S. Small and Community Banks Have Vanished — Trump Administration Offers Solutions

U.S. Treasury Secretary Scott Bessent announced at the G20 (Group of 20) Finance Ministers Meeting in Asheville, North Carolina, that the federal government will significantly ease regulatory constraints on small and community banks. According to a speech draft obtained by the foreign media outlet Axios, Bessent emphasized that for all Americans to have access to opportunity, 'Main Street banks'—those serving local communities—must have an equal chance to succeed as their Wall Street counterparts.

The high-level meeting brought together top executives from Wall Street, including Jamie Dimon, CEO of JPMorgan Chase, and David Solomon, CEO of Goldman Sachs. Breaking from past practices where policy discussions were led solely by government officials, the Trump administration has actively involved private-sector leaders in policymaking. Bessent stated that attendees unanimously agreed that policymakers should consult businesses during the design phase of regulations, rather than waiting until policies take effect and companies are forced to absorb their impacts.

Excessive Regulation Has Led to the Disappearance of Nearly Half of U.S. Small and Community Banks

Regarding recent changes to ease capital adequacy requirements for qualified community banks, Bessent said the adjustment allows eligible banks to reduce their capital reserve ratios, which is expected to 'unlock tens of billions of dollars in capital to be reinvested into small business and home loans across the United States.'

Bessent reiterated that excessive regulations implemented after the 2008 global financial crisis have led to the disappearance of nearly half of all small and community banks nationwide. He bluntly stated that the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, enacted in response to the subprime mortgage crisis, was intended to end the financial malady of 'too big to fail,' but instead created a distorted system where smaller institutions are 'too small to succeed.'

Although the Dodd-Frank Act comprehensively overhauled the financial regulatory framework and strengthened federal oversight of financial institutions, Bessent criticized that by 2023, this complex regulatory system still failed to prevent the U.S. from experiencing one of the three largest bank collapses in its history, including the consecutive failures of Silicon Valley Bank and several regional banks.

Trump Administration Pushing Comprehensive Deregulation of Financial Rules

The Trump administration is now advancing a comprehensive deregulation agenda, with relevant regulatory agencies planning a full review of bank capital rules. The plan aims to moderately reduce capital requirements for large banks while providing significant regulatory relief for small and medium-sized financial institutions, positioning this as a core strategy to stimulate overall economic growth.

Bessent noted that the noticeable rebound in applications for new bank charters (de novo charters) indicates strong market confidence in the government's policy shift. According to reports, the number of new bank charter applications in the first year of Trump's second term has already surpassed the total number filed during the previous administration's entire tenure. Notably, this wave of applications is primarily driven by fintech and digital asset firms such as Coinbase and Ripple, signaling that emerging crypto-financial companies are accelerating their transformation to expand their operations under traditional financial institution models.

Editor: Hsu Yung-hsiang

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