Wall Street banks push Fed to lock in softer supervision regime

Wall Street banks are pressing the Federal Reserve to make its new supervisory playbook hard to unwind, a move that could change daily work at Goldman Sachs by cutting exam prep, shrinking remediation fire drills and forcing control teams to defend fewer but more consequential findings.

The Fed said on November 18, 2025, that its new supervisory operating principles would focus examiners on material financial risks that threaten safety and soundness, reduce duplication between exams from different supervisors and streamline remediation of cited issues. It also said it would train examiners on the new approach and later formalize it in public guidance or regulatory changes. For Goldman employees, that is not a policy footnote. It goes directly to how much time compliance, legal, risk and internal control teams spend on issue management, how often front-office launches get slowed by supervisory concerns and how much board-level attention gets pulled into fixing problems.

The shift also changes the language of supervision. The Fed’s guidance says matters requiring attention and matters requiring immediate attention are written supervisory findings communicated to a bank’s board or executive-level board committee, with Reserve Banks required to formally communicate them. The central bank has also brought back nonbinding supervisory observations, reversing a 2013 directive that had eliminated them. Banks like the softer tone, but they worry that observations are legally ambiguous, leaving firms to guess how much urgency they carry if management decides not to act.

That ambiguity matters inside Goldman because it changes leverage across the organization. A regime with fewer formal MRAs can reduce paperwork and false positives, but it can also shift more responsibility onto the bank to prove that its systems are strong enough to catch material risk without a supervisory push. Senior managers will still care about escalation, audit readiness and how issues are documented. For control functions, the job may become less about simply clearing findings and more about explaining materiality, defending judgments and showing that internal standards would survive a more aggressive future exam cycle.

Michael S. Barr warned in November 2025 that weakening supervision, scaling back examiner coverage and diluting ratings systems could make it harder to stop risk buildup before it is too late. He also said staffing in the Fed’s Supervision and Regulation division was planned to fall by 30% by the end of 2026. That warning underscores the political stakes for Goldman staff planning careers in risk and compliance: a lighter touch today could be followed by a sharper reversal in a different Washington, D.C. climate.

Goldman has made clear it sees the upside. In its 2025 annual report, the firm said it should benefit from a more balanced regulatory regime, said its stress capital buffer had been lowered by a cumulative 320 basis points since 2020, and reported 2025 net revenues of $58.3 billion, EPS of $51.32 and return on equity of 15.0%. It also said it had cut historical principal investments by more than 90%, from roughly $64 billion to $6 billion, and remained the No. 1 M&A adviser for the 23rd year in a row. That is the core tension now: Goldman wants room to grow, but the people inside the firm still have to live with whatever supervision regime sticks.