As the planning for the transition to a second Trump administration begins, so are discussions and forecasts regarding what the regulation of banks might look like over the next four years. The conflicting priorities of Trump’s populist rhetoric on the one hand with his strong preference for a deregulatory agenda on the other hand make predictions difficult. However, there are a number of changes we expect to see.

New Leadership at the Office of the Comptroller of the Currency (OCC)
The current head of the OCC, Acting Comptroller Michael Hsu, will almost certainly step aside on Jan. 20. His replacement may also serve in an acting capacity for an extended period of time. President Trump has previously expressed a preference for keeping senior government officials in acting status because he could replace them more easily than those that had been confirmed.

The End of Basel III Endgame
The banking industry has been strongly opposed to the newest set of capital rules, nicknamed the “Basel III Endgame." Banks have argued that the new rules require them to hold far more capital than necessary to appropriately manage risk. The Trump administration will almost certainly cut back on the scope of these rules, and may be inclined to withdraw and rewrite them completely. Either way, banks can expect capital requirements that are lower than currently proposed.

Post-Chevron Deregulatory Agenda
Earlier this year, the Supreme Court overturned Chevron v. NRDC, its long-standing precedent granting a large amount of deference to agency interpretations of their own laws and regulations. The elimination of Chevron deference in combination with the Trump administration’s strong push for fewer federal regulations could result in some more leeway for banks, especially with respect to capital requirements, compliance and risk management, stress tests and consumer protection. 

We will continue to monitor these developments and more as the second Trump administration begins to take shape.