Potential Trump Pick Signals Lighter Rulewriting Touch for Bank Regulators

A potential pick to lead a key U.S. bank regulator under the incoming Trump administration has signaled a lighter touch on rulewriting, indicating a shift in the regulatory landscape that could have significant implications for the banking industry. Travis Hill, the vice chair of the Federal Deposit Insurance Corporation (FDIC), has suggested that the new administration should adopt a more permissive approach to bank regulations, focusing on minimizing capital impact and encouraging innovation.



Hill's remarks, made in prepared remarks to the American Bar Association, come as the Trump administration prepares to take office and appoint new leadership to the nation's bank regulatory agencies. The FDIC, along with the Office of the Comptroller of the Currency (OCC) and the Federal Reserve, plays a crucial role in overseeing the banking industry and setting regulatory standards.



Hill's comments suggest that the new administration may be more open to revising or rolling back certain regulations, such as the Basel III Endgame, which would have significantly raised big bank capital via new risk measurements. This could provide banks with more flexibility in managing their capital and potentially reduce the amount of capital they are required to hold.



Additionally, Hill has signaled a more open stance towards digital assets and fintech partnerships, suggesting that the current FDIC stance of requiring banks to gain individual approval before pursuing any blockchain-related activities has been "damaging." Instead, Hill has advocated for establishing clear standards of legally permissible activity, which could encourage banks to explore and adopt new technologies more readily.



The potential shift in regulatory approach under the new Trump administration could have significant implications for the banking industry. A lighter touch on rulewriting could lead to reduced capital requirements, increased innovation, and a more permissive stance towards digital assets and fintech partnerships. However, it is essential to note that these changes could also introduce new risks and challenges, such as increased competition from fintech companies and potential regulatory and operational challenges associated with integrating new technologies and partnerships.

In conclusion, the potential appointment of Travis Hill to lead a key U.S. bank regulator under the incoming Trump administration signals a shift in the regulatory landscape, with a focus on minimizing capital impact and encouraging innovation. This could have significant implications for the banking industry, but it is crucial for banks to navigate these changes carefully, considering the potential risks and challenges that may arise.