According to Reuters, when news broke about President-elect Donald Trump’s team considering drastic changes to major banking regulators, U.S. bank stocks barely flinched. Wall Street doesn’t seem too worried because the financial industry believes such moves lack the necessary political support to become reality.
The Wall Street Journal revealed that Trump’s advisers, along with officials from the Department of Government Efficiency (recently established), have been mulling over the idea of possibly dismantling the Federal Deposit Insurance Corp (FDIC), based on insights provided by insiders.
Marine Leleux, a strategist at ING, pointed out that revamping major federal regulatory bodies is no walk in the park. She noted, “To pull this off, you’d need Congress on board. Even with the Republicans controlling both the Senate and the House, getting the Democrats to agree is a long shot.”
There have been discussions with potential FDIC nominees about whether it’s feasible for the agency to be merged into the Treasury Department, as reported by the WSJ.
Despite the chatter, the stocks of major U.S. banks, including JPMorgan Chase, Wells Fargo, Citigroup, Bank of America, Morgan Stanley, and Goldman Sachs, saw less than a 1% dip.
Top executives in the banking world are anticipating that Trump’s administration will roll out growth-friendly policies while slashing some of the regulations perceived as overly burdensome.
Terry McEvoy, an analyst at Stephens, commented, “We might see banking regulations from the Biden era getting reworked or eased. The Republican-led Senate Banking Committee is likely to have a hand in these changes.”
The FDIC is crucial in maintaining the financial stability of the U.S., with its deposit insurance fund securing trillions in bank deposits. Last year’s wave of regional bank failures rattled the industry, piling billions in losses onto the FDIC’s insurance fund.
Mayra Rodriguez Valladares, a consultant at MRV Associates, expressed her concern, stating, “If there’s any seriousness about scrapping the FDIC, it’s alarming. They’re the only group with the know-how to handle bank resolutions effectively.”
This report includes contributions from Arasu Kannagi Basil, Jaiveer Shekhawat in Bengaluru, and Matt Tracy in Washington, with editing by Noor Zainab Hussain and Anil D’Silva.
