US to roll back bank rules imposed after 2008 crisis - FT

US to roll back bank rules imposed after 2008 crisis - FT

The United States is set to roll back bank rules imposed in the aftermath of the 2008 financial crisis, as per a recent request from the Conference of State Bank Supervisors (CSBS) to the Office of the Comptroller of the Currency (OCC). This move comes in response to Executive Orders (EO) 14219 and 14267 issued by President Trump, which direct federal agencies to rescind unlawful and anti-competitive regulations.

Background

The OCC's preemption regulations, finalized in 2011, have been a contentious issue. These rules allowed national banks to preempt a broad range of state consumer financial laws, which was seen as contrary to the plain language and intent of Section 5136C of the National Bank Act. This section, enacted in 2010, sought to limit the OCC's preemption powers and establish a clear standard for when state consumer financial laws could be preempted.

Executive Orders and Legal Basis

EO 14219, signed on February 19, 2025, directs federal agency heads to rescind regulations based on anything other than the best reading of the underlying statutory authority. EO 14267, signed on April 9, 2025, requires agencies to eliminate regulations that are anti-competitive, including those that limit competition between entities. The CSBS argues that the OCC's preemption regulations violate both these executive orders.

Impact of the Rollback

The rollback of these preemption regulations could have significant implications for the banking industry. It would require the OCC to implement a process that complies with the Barnett Bank standard, which mandates a case-by-case decision based on substantial evidence. This shift could lead to a more nuanced approach to preemption, potentially reducing costly litigation and fostering a more competitive banking environment.

Future Steps

The CSBS has requested that the OCC promptly rescind the current preemption regulations and propose new rules that align with the National Bank Act's preemption standard. This move is aimed at addressing concerns about the OCC's broad preemption powers and ensuring compliance with both executive orders and the plain language of the National Bank Act.

Conclusion

The rollback of the OCC's preemption regulations is a significant development in the ongoing debate over the appropriate scope of federal versus state regulatory authority in the banking sector. As the OCC moves forward with this process, it will be crucial to ensure that any new regulations are consistent with the unambiguous directives provided by Congress and affirmed by the U.S. Supreme Court.

References

[1] https://www.csbs.org/occ-preemption-rescission