What’s In Store For Banking & Financial Services Regulation?

Financial sector regulations are likely to see significant changes under a Trump administration. This post from Dechert looks at some possibilities, including one that was recently proposed by the Federal Reserve Bank of Minneapolis. It addresses the “too big to fail” problem with a system of increasingly stringent capital requirements, in what could be construed as as a slow turning of the screws on big banks in order to pressure them to get smaller. The Minneapolis Plan, at the outset, would apply to banks with more than $250 billion in assets – currently eight U.S. banks. In addition, this plan would include a tax on so-called shadow banks that are not among the eight, “in order to create a ‘level playing field’ and address concerns that the new capital requirements would drive the migration of banking activities from the banking sector to the less-regulated shadow banking sector.” The plan would also reduce the regulatory burden on community banks – defined as banks with less than $10 billion in assets – in a number of ways, including by exempting them from the Volcker Rule. Looking at another potential regulatory change, the authors note that members of both political parties have voiced support for reestablishing the Glass-Steagall separation of commercial and investment banking.