The election of Donald Trump to a second term in office will usher in significant yet unknown changes to banking regulations, industry experts said Jan. 7 during a panel discussion hosted by law firm Holland and Knight.
Though Consumer Financial Protection Bureau Director Rohit Chopra has not indicated he will resign but is expected to be removed from his position if he doesn’t step aside before the Jan. 20 inauguration of President-Elect Donald Trump, said Holland & Knight Partner Eamonn Moran. Chopra’s refusal to resign indicates the bureau will continue introducing new rules until President Joe Biden steps aside on Jan. 20, said Moran, former counsel of the CFPB.
The bureau has released six significant proposed rule changes since October, when the CFPB finalized its open banking proposal. In December, the CFPB released a final rule limiting the overdraft fees banks with more than $10 billion in assets can charge. On Jan. 7, the bureau banned including medical bills on credit reports used by lenders. Though President-Elect Trump is expected to take a less active approach to regulating banks than his predecessor, he is still known as a populist and has proposed capping credit card interest rates at 10 percent, Moran said.
Trump has not named Chopra’s potential replacement, despite nominating proposed leaders of other agencies. Moran expects the Trump administration will implement a pause on new rulemaking, similar to his first year in office in 2017.
Deposit insurance has been a point of contention since the failures of Silicon Valley Bank and Signature Bank in the spring of 2023. House Financial Services Committee Ranking Member Maxine Waters introduced a bill last month to require the FDIC and National Credit Union Administration to issue a proposal to increase the deposit and share insurance maximum for business payment accounts to a higher number from its current maximum of $250,000.
Leadership changes are underway at federal agencies. OCC Acting Comptroller Michael Hsu, FDIC Director Martin Gruenberg and Federal Reserve Vice Chair for Supervision Michael Barr have announced their pending resignations. Barr’s resignation, announced Jan. 6, is effective Feb. 28 and leaves the fate of the Federal Reserve’s capital plan for banks with more than $100 billion in limbo. The capital plan, also known as the Basel III endgame, would require the country’s large banks to increase capital requirements by 9 percent.
Holland and Knight Associate Rolland Hampton expects Trump will appoint either Federal Reserve Govs. Michelle Bowman or Christopher Waller, both Republicans who oppose the capital requirements, to succeed Barr. Basel III, which is slated to take effect July 1, is still in its comment period. Barr extended the comment period to Jan. 16 from Nov. 30 following extensive pushback to the plan.
Despite Republicans holding House and Senate majorities, the advantages are slim and leave the party with little room to lose, said Holland & Knight Government Relations Attorney Ed Perlmutter, a former eight-term congressman from Colorado. The GOP holds a 53-47 advantage in the Senate and a 218-215 majority in the House.
Perlmutter sees potential tariffs under the Trump administration as a potential revenue generator, while helping to achieve foreign policy objectives. Privatizing government-sponsored enterprises Fannie Mae and Freddie Mac is also possible, he added, as the organizations have been under government conservatorship for 17 years.
The regulatory outlook comes as banks are optimistic about their growth chances for 2025, according to a Wipfli annual report of 345 banking executives on the state of the industry. Fifty-eight percent of financial institutions expect to grow at least 5 percent this year, up from 36 percent last year. Forty-five percent added banking-as-a-service/embedded banking over the past five years, while 60 percent upped their investment in cybersecurity technology.
“The economic environment was more favorable for financial institutions in 2024,” according to Wipfli. “Liquidity concerns eased, and interest rates became more manageable. Consequently, credit losses were lower than anticipated by most institutions, and loan portfolios remained relatively stable.”
Large financial institutions reported having more confidence than smaller banks: Forty-four percent of executives at large financial institutions expect projected annual asset growth of at least 9 percent, compared to 11 percent of midsized financial institutions and 18 percent of small banks.
Financial institutions cited digital engagement, talent management and artificial intelligence/data analytics as their top priorities heading into 2025. They listed compressing net interest margins, growing core deposits and the regulatory/economic environment as having the largest impacts on their strategic priorities.
Cybersecurity/fraud topped the list of the most pressing concerns for the second straight year for financial institutions of every asset size. Sixty-one percent of financial institutions reported that fraud was rising at their institutions, up from 36 percent in 2024.
Executives at smaller financial institutions were more likely to be concerned about recruiting and keeping employees. Those who were worried have focused on workplace culture and increasing pay. About one-quarter listed succession planning as a top concern. Of those, 77 percent offer leadership or executive training, according to Wipfli.
Bankers listing data analytics/AI as an important strategy in 2025 cite detecting fraud and financial crime as the leading use case. “Those respondents also plan to leverage AI for risk analytics and regulatory and financial reporting,” according to Wipfli.