Fed stands out among bank enforcement action decline: Brookings

Dive Brief:

Bank enforcement actions have declined over the past decade, with the Federal Reserve “standing out for substantially laxer enforcement,” according to a Brookings Institution study.
Formal enforcement actions by the Fed have dropped by about half since the COVID-19 pandemic, wrote Aaron Klein and Cameron Connell, in a research post published Wednesday. The Fed decline also stands out because it saw the smallest drop in the number of banks it supervised during that time period, compared with the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp.
The OCC’s enforcement activity declined more slowly than the Fed and FDIC, and with more variability year to year, according to the research. And while the FDIC experienced a “steeper, more sustained decline” than the OCC, it was still substantially less than the Fed, the researchers wrote.

Dive Insight:

Brookings researchers reviewed data from each agency’s public list of enforcement actions from 2015 to 2025, a window of time that covers Democratic and Republican presidential administrations.

Within the bank regulatory framework, the OCC supervises national banks, the Fed supervises state member banks and the FDIC supervises state non-member banks. The Fed’s purview also extends to bank holding companies and foreign bank offices in the U.S., among other entities.

As the banking industry consolidates, the number of lenders dropped about 30% between 2015 to 2025, from 6,182 banks to 4,336. The OCC saw a 36% decline in the number of banks it oversees; the FDIC, a 31% drop; and the Fed, a 16% decline, researchers said.

Klein and Connell noted it’s unclear whether the number of banks or total assets in the banking system is more important for their analysis. “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,” they wrote.

Collectively, all three agencies saw 341 enforcement actions a year, on average, between 2017 and 2019 compared with 263 annually between 2023 and 2025. Zeroing in on each agency, the FDIC saw a dip from 168 to 126, while the OCC saw a slight uptick, from 91 to 95. And the Fed experienced a decline from 81 to 42.

Enforcement actions at the Fed have plummeted by more than 58% since Fed Gov. Daniel Tarullo was the de facto vice chair of supervision, Brookings researchers noted. He departed in 2017.

The collapse of Fed-regulated Silicon Valley Bank occurred during the time frame examined, offering evidence of the negative consequences that can arise from lax supervision, researchers wrote.

Fed officials have said supervisors were slow to identify problems and take action against the lender. In reviewing its role in the bank’s failure, the Fed deemed its supervisory approach with SVB “too deliberative and focused on the continued accumulation of supporting evidence in a consensus-driven environment.”

Klein and Connell wondered whether “this insight applies far more broadly across the Federal Reserve’s supervisory staff.”

Banks regulated by the Fed have either become more compliant relative to banks supervised by the OCC and FDIC, or the Fed has pulled back on supervision – “willfully by not elevating problems to the level of an enforcement action, or by ignorance in failing to find such problems,” the researchers wrote.

In light of the data, it’s “even more perplexing” that the Fed would move toward new supervisory principles, which seem to raise the bar for enforcement actions and suggest bank examiners should “give greater deference to banks’ own conclusions about whether they have remedied the problems causing enforcement actions,” Klein and Connell wrote.

Researchers noted a lack of data related to regulators appointed during Trump’s second term, although they said the trends they observed seem to be holding.

“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,” they wrote. “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 [term] levels off under Biden.”