Changing Landscape for US Banks under Trump
Bank Treasurers look to assess changes to bank regulation with President Trump and a Republican Congressional majority, plus new people at prudential regulators, while keeping an eye on the rate environment.
Changes in Washington that were not given much probability at last year’s Annual Meeting of the Bank Treasurers’ Peer Group will dominate this year’s discussions. What might Trump’s Washington do to reform US bank regulation? To help shed light on this, we will have a panel made up of government affairs heads from our sponsor bank, Morgan Stanley, member banks, plus experts from The Clearing House and Financial Services Roundtable. Among the items to be discussed are the Choice Act, erasing the arbitrary $50B total asset line for more stringent stress-testing and supervisory review created by Dodd-Frank, the new Fed stance post-Tarullo, the changes likely coming to housing finance and efforts to introduce regulation for fintech companies that are competing and increasingly collaborating with banks.
Bank stocks, including those of the group’s mostly US regional bank members, signaled the initial optimism for a more profit-friendly banking business environment when Trump was elected. This was due to better prospects for regulatory relief as well as anticipated Fed moves on rate hikes. Bank stocks since Trump’s inauguration have shown more uncertainty. How will a rising rate environment play out over the next 12 months and how NIM-friendly will it be? These questions are on the minds of investors and will be a big topic of discussion for bank treasurers, too. Plus, the Fed has hinted it may start shrinking its $4.5T balance sheet sooner than anticipated, which will have bank treasurers looking at how this will impact markets for the assets the Fed will allow to run-off or sell, along with the impacts on the yield curve. This will make the perennial discussions about interest rate policy adjustments and deposit policies even more interesting. And, what are fixed income investors in bank debt thinking given these changes?
Finally, while the likelihood of distinctions between banks above and below the $50B total assets line are more likely to be dissipating from a supervisory and regulatory standpoint, until they do, this year’s Annual Meeting will provide more focused sessions for banks on either side of the line to discuss key issues. We will also take the time to help banks with non-US parents navigate the intermediate holding company process.
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