Bessent Urges Community Bank CEOs to ‘Go on the Offense’

As America’s community banks face mounting pressure from regulation, consolidation, and digital disruption, Treasury Secretary Scott Bessent is calling for a bold shift in mindset. Speaking at a Federal Reserve conference, Bessent urged community bank CEOs to “go on the offense,” embracing technology, modernization, and younger customers to reclaim market share in a changing financial landscape. His remarks come at a time when smaller lenders are fighting to remain competitive amid rising interest rates, shifting credit trends, and the dominance of large national banks.

The Challenge Facing Community Banks

Over the past decade, the number of community banks in the U.S. has fallen by nearly half, from over 7,000 to roughly 3,400 institutions. Their share of total bank assets, loans, and deposits has steadily declined, reflecting the growing influence of mega-banks with vast digital infrastructures and lobbying power.

Bessent argued that this decline wasn’t inevitable—it was the result of regulatory and structural imbalances. The Dodd-Frank Act, he said, created a system where “too big to fail” became “too small to succeed.” Compliance costs, complex reporting rules, and capital requirements have burdened smaller institutions, making it harder for them to compete on loan pricing, mortgage access, and deposit products.

Technology as the New Playing Field

Despite the challenges, Bessent believes community lenders still have a critical advantage: personal relationships and local trust. However, to thrive in the next decade, they must pair that trust with technology. “It’s all going to center around technology,” he said, pointing to the rise of digital banking, mobile deposits, and online checking accounts as essential tools for customer retention.

By investing in fintech partnerships, modern core banking systems, and AI-driven credit evaluation, community banks can improve operational efficiency and expand access to loans and mortgages for local businesses and families. This digital transformation, Bessent suggested, is not just optional—it’s the pathway to survival.

Regulatory Reforms and New Opportunities

Recent moves by federal agencies may help. Under new leadership, Trump-appointed regulators have begun to lighten regulatory burdens on small lenders. The Office of the Comptroller of the Currency (OCC) has reduced assessments and adopted a risk-based exam approach. Meanwhile, the FDIC is proposing higher asset thresholds and streamlined branch applications.

Additionally, the Federal Reserve is considering a reduction in the community bank leverage ratio, a move that could free up more capital for lending and investment. These reforms, combined with new guidance from the Financial Crimes Enforcement Network (FinCEN) to simplify compliance procedures, signal a regulatory environment that may once again favor smaller institutions willing to innovate.

The Road Ahead: Offense as Survival Strategy

For Bessent, the message is clear: community banks can no longer afford to play defense. They must reclaim market share by expanding lending capacity, attracting younger customers, and using data-driven insights to compete with larger banks. “When you see the creation of new banks, it’s a sign the ecosystem’s healthy,” he said, calling for a revival in de novo bank formation and entrepreneurial spirit within the sector.

Closing Insights
As interest rate volatility and digital competition reshape the industry, community banks that modernize will not just survive—they will redefine local finance for a new generation. By combining trusted relationships with digital innovation, small lenders can restore balance in the U.S. credit system and ensure that local economies continue to thrive.

• Expect further digitization of community lending and deposits over the next decade.

• Fintech collaborations will be key to lowering costs and improving customer experience.

• A balanced regulatory framework could help revive small-bank creation and promote fair competition.

Previous Post North Dakota Bank, Fiserv Launch Roughrider Stablecoin

Next Post Morningstar Says Impact of First Brands Collapse on Banks Will Be Limited