There is no single agreed plan to “fix” banking. But U.S. policymakers can make progress on six practical fronts: tailor oversight to risk, make bank applications clearer and more predictable, protect access and community banking, keep consumer safeguards effective, modernize compliance, and allow responsible innovation without overlooking new risks. The goal is a system that is safe, fair, competitive, accessible, and workable to supervise—not simply one with fewer rules.
What should “fixing” the banking system mean?
This article uses “our banking system” to mean the United States. The six proposals below are a practical synthesis of priorities and arguments in Federal Reserve materials, not a consensus blueprint endorsed by every regulator or policymaker.
A reform should be judged by more than whether it reduces paperwork or speeds up approvals. It should preserve safety and soundness while supporting useful banking services, fair access, competition, and effective supervision. The Federal Reserve’s 2024–27 strategic plan names consumer protection, community development, financial inclusion, and community reinvestment among its priorities. In 2026 testimony, Federal Reserve Governor Michelle W. Bowman described the supervisory objective as supporting economic growth while safeguarding financial stability.
| What to evaluate | Question to ask |
|---|---|
| Safety and soundness | Does the change leave supervisors able to identify and address material risks? |
| Access | Could households or businesses lose access to branches, credit, or other services? |
| Competition | Does the change make room for viable entrants and smaller institutions, or risk greater concentration? |
| Fairness and protection | Are customers protected from discrimination, abuse, and avoidable loss of access to funds? |
| Compliance clarity | Can banks understand what is required and direct effort toward meaningful risks? |
| Operational resilience | Are cybersecurity, third-party, and other operational risks being managed? |
1. Match rules and supervision to a bank’s risks
Requirements should reflect an institution’s size, complexity, risk profile, and business model. A small community bank with a relatively straightforward business should not automatically inherit every expectation designed for a large, complex institution. At the same time, a smaller bank should not receive a pass on risks that are material to its customers or its stability.
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Bowman argued for risk-sensitive tailoring in 2025 and reiterated the case in 2026 testimony. The practical task is to calibrate both rules and supervision so that requirements fit the institution without weakening core safeguards. Tailoring is not simply deregulation by another name: it should make expectations more proportionate while retaining the ability to spot and address significant risks.
2. Make bank formation and merger reviews clearer
Regulators can make application processes more legible by publishing clear standards, predictable timelines, consistent forms, and better-coordinated agency procedures. Bowman urged clearer approval standards and timelines and suggested revising forms when agencies routinely need the same additional information. Applicants should be able to understand what evidence is expected and where an application stands.
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That clarity could help viable new entrants and smaller institutions navigate the process. It should not mean automatic approval or a shortcut around examining a merger’s competitive effects and risks. In a 2024 speech, Bowman discussed how rural-market screens and deposit-based analyses can prompt additional review or delay. The goal is a consistent, understandable review—not a presumption that every merger is beneficial or harmful.
3. Keep local access and community banking in view
Banking policy should account for the role local institutions can play in serving communities, alongside the services provided by larger banks and other channels. In a February 27, 2025 speech, Bowman said: “Without this diverse banking ecosystem, 30 percent of American communities would not have access to a physical bank location.” That is Bowman’s statement in that speech, not a new estimate established here; its point is that the mix of institutions can matter to physical access.
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The Federal Reserve’s 2024–27 strategic plan calls for research and outreach on access to credit and banking services, community investment, and household financial conditions. Policymakers can use that work to ask whether rules or market changes leave particular places or groups with fewer practical ways to bank. Protecting community banking does not require assuming every small bank serves every community well; it requires treating access as an outcome worth measuring.
4. Keep consumer protection and community obligations effective
Reform should preserve strong attention to fair lending, consumer compliance, and investment in communities. Bowman said in 2024 that compliance with consumer-protection and fair-lending law is essential to broad access to credit and financial services. The Federal Reserve strategic plan likewise includes consumer protection and Community Reinvestment Act-related supervision, outreach, and research.
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The useful policy question is not only how much compliance costs, but whether protections work and who benefits from them. Reviews should examine whether people can access services fairly, whether customers face avoidable harm, and whether obligations intended to support communities remain effective. Cutting a requirement without checking what protection or community benefit it provides could shift costs onto customers instead of eliminating waste.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.5. Modernize compliance and reporting around current risks
Compliance rules should be reviewed to see whether they help identify real threats or impose burdens that no longer produce commensurate value. In 2026 testimony, Bowman called for improvements to the Bank Secrecy Act and anti-money-laundering framework, including reconsidering static reporting thresholds so resources can focus on suspicious activity while avoiding unnecessary, disproportionate burdens.
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That is her stated position, not evidence that a threshold change has been enacted or that fewer reports would automatically improve enforcement. Any redesign has to preserve information useful to law enforcement while reducing low-value or outdated work. Policymakers should assess the quality and usefulness of reporting as well as its volume, and make clear what institutions must do under any revised standard.
6. Permit responsible innovation while managing operational risk
New technology and partnerships can expand how banks serve customers, but novelty alone does not make a service safer, cheaper, or more inclusive. Bowman’s 2026 testimony says the Federal Reserve is encouraging bank innovation and developing clarity on digital-asset activities while emphasizing the need to address safety-and-soundness risks.
Her 2024 speech also notes that fintech partnerships can benefit customers, while poorly managed deposit arrangements can jeopardize deposit insurance or customers’ access to funds. The speech identifies cybersecurity and third-party risk as material concerns for community banks. Clear supervisory expectations can help banks assess these arrangements before problems arise; oversight should focus on the actual risks and responsibilities involved, not simply on whether a service is new.
How to tell whether a reform is working
Evaluate results after implementation, not just the promised reduction in burden or delay. In her 2024 speech, Bowman urged policymakers to ask, “How will banks adjust their activities in response?” She specifically cautioned that banks might raise prices, leave low-margin businesses, or contribute to greater concentration after regulatory changes. Those are possible effects to test, not inevitable outcomes.
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