Speaking at the Federal Reserve Capital Conference, Bessent said there is a need for "deeper reforms" in bank regulation, noting that the system has been marked by "regulation by reflex," where bank regulators tend to introduce new rules after issues have already occurred.

"Rather than preempting crises, regulators all too often react to them after the fact. They play the role of a hazmat cleanup team instead of preventing dangerous spillovers in the first place," Bessent said.

"Rather than reflexively regulate anything that hits the headlines, we need to instead be more explicit about our vision for the financial system," he added.

As Aldgra Fredly reports for The Epoch Times, Bessent said the Treasury will reinforce reform efforts by working to "break through policy inertia, settle turf battles, drive consensus, and motivate action to ensure no single regulator holds up reform."

He suggested that bank regulators should review outdated capital requirements that place "unnecessary burdens on financial institutions" and reduce bank lending.

Bessent specifically referenced a July 2023 proposal that would subject banks to two sets of capital requirements. He believes that bank regulators should consider scrapping the dual-requirement structure.

"This dual-requirement structure did not derive from a principled calibration methodology. It was motivated simply to reverse-engineer higher and higher capital aggregates," he said.

Bessent noted that the framework "was at odds with capital reform as a modernization project because it would have preserved the antiquated capital requirements as the binding floor for many, perhaps most, large banks."

He also suggested allowing any bank that is not subject to modernized capital requirements the choice to opt in, extending the benefits of reduced capital requirements to smaller banks.

"We cannot give only large banks the benefit of these reduced requirements, as actually contemplated by the last administration," he said.

The Trump administration has been at loggerheads with the Federal Reserve over interest rate cuts. President Donald Trump wanted the Fed to lower interest rates to make borrowing less expensive, but the central bank has kept its benchmark policy rate unchanged at 4.25 to 4.50 percent.

Federal Reserve Chair Jerome Powell has said the lack of certainty over tariff-driven inflation has made the Fed delay lowering interest rates for now, since price impacts are expected to manifest weeks or months after tariffs settle into the markets.