A significant shift in U.S. banking policy may be on the horizon, as Federal Reserve Governor Stephen Miran has strongly signaled a move towards deregulation.
At the heart of his argument is the idea that post-2008 financial crisis rules have become too restrictive. Miran, echoing sentiments from Fed Vice Chair for Supervision Michelle Bowman, believes this 'over-regulation' is unintentionally pushing lending activity away from traditional, well-supervised banks and into the less-transparent world of non-bank lenders, often called 'private credit'. Their goal is to recalibrate the rules to encourage banks to lend more freely again.
This isn't a sudden development but the culmination of a carefully laid-out agenda. Let's trace the key steps. First, Vice Chair Bowman has been advocating for months to revise the strict 'Basel III Endgame' rules, promising a more industry-friendly re-proposal in early 2026. Miran’s public support adds significant political weight, making this revision much more likely.
Second, recent economic data provides justification for this shift. The Fed’s own Senior Loan Officer Opinion Survey (SLOOS) shows that bank lending standards have only tightened modestly. The main reason cited is intense competition from other lenders, not a lack of demand or severe economic distress. This allows policymakers to frame the issue as one caused by burdensome rules, rather than a struggling economy.
Finally, what about the risks in the booming private credit market? Miran acknowledges some recent “bumps,” like investment firm Blue Owl freezing customer withdrawals. However, he emphasized that these are not yet “macro-worrisome.” This confidence stems from the Fed's 2025 stress tests, which concluded that major banks are well-capitalized enough to withstand potential shocks from their exposure to non-bank lenders. By framing the risk as manageable, it strengthens the case for easing regulations on the banking sector itself.
In essence, the narrative is shifting from a post-crisis mentality of 'maximum safety' to a more balanced approach focused on 'regulatory efficiency'. The prevailing view is that easing the burden on banks will unlock credit for the broader economy, a change that markets are already beginning to price in.
- Glossary
- Basel III Endgame: The final phase of international banking regulations developed after the 2008 financial crisis, requiring banks to hold more capital to absorb potential losses.
- Private Credit: Direct lending to companies from non-bank institutions, such as investment funds, rather than through traditional bank loans.
- SLOOS (Senior Loan Officer Opinion Survey): A quarterly survey conducted by the Federal Reserve to assess changes in the supply and demand for bank loans.