Former Federal Reserve Governor Michael Barr sharply criticized regulatory rollbacks for US banks in a speech on June 6, 2026, at American University, saying these changes significantly weaken bank regulation and supervision [1, 2]. Barr highlighted that weaker capital rules, diluted liquidity requirements, and reduced oversight raise the risk of bank stress and threaten financial stability over the coming years [1, 2].

The recent rollbacks include reduced stress test requirements, erosion of leverage ratios, weaker implementation of Basel III capital standards, and cuts to Global Systemically Important Bank (GSIB) surcharges for the largest banks [2]. These changes have lowered capital requirements for the eight largest US banks—holding 60% of banking assets—by about 6%, equating to roughly $60 billion less capital to absorb losses [2].

Barr noted that these deregulatory shifts began around a year ago when Michelle Bowman became Federal Reserve vice-chair for supervision, overseeing the moves since Barr resigned from the role [1]. He pointed out that Trump-era officials had started relaxing capital rules and narrowing supervision scope to help traditional banks compete with private credit firms [1].

Barr warned that without proper safeguards, banks may take excessive risks in pursuit of higher profits, endangering businesses, households, and the broader economy. "I believe that recent steps by the Federal Reserve and other agencies will undermine the safety and soundness of banks and increase financial stability risks," he said [1]. He added that while deregulation may provide a "short-term sugar high," it leaves the financial system dangerously underinsured against shocks that hurt ordinary Americans [2].

Barr stressed the importance of solid capital and stable funding so banks can withstand unexpected losses while continuing to lend. "With solid capital and stable funding sources, both individual banks and the banking system as a whole can absorb a wide range of shocks," he said [1].

The debate comes as the Federal Reserve faces pressure to balance easing regulatory burdens with preserving a resilient financial system. Barr's remarks underscore concerns about the impact of recent regulatory rollbacks on the safety of the US banking sector.

Barr's speech titled "Deregulating in a Financial Boom: What Could Go Wrong?" was delivered and made public on June 6, 2026 [2, 1].