Financial leaders from Bank of America and JPMorgan discuss potential return of Trump in office
In the banking industry, a shift in regulatory dynamics is underway, with executives faced with a challenging yet evolving landscape. This transition is marked by efforts to reduce regulatory burden, restore stability, and adapt to emerging risks, particularly in the areas of technology and global market shifts.
JPMorgan Chase Chief Operating Officer Jennifer Piepszak has noted that the new Trump administration has taken centre stage in the banking industry, drawing significant attention. Meanwhile, Bank of America CEO Brian Moynihan has expressed concern about the continuous swinging of the regulatory pendulum, affecting the operation of companies.
One of the key areas of focus is the Federal Reserve's stress testing process, with bank executives welcoming increased transparency in this process. Federal regulators, including the OCC, FDIC, and Federal Reserve, are actively seeking public comment on reducing burdensome regulations. They propose rolling back the 2023 Community Reinvestment Act (CRA) final rule to reinstate earlier regulations from 1995, aiming to provide greater clarity and reduce compliance complexity.
The implementation of the Basel III framework across different jurisdictions is another challenge, introducing increased complexity in risk measurement, capital management, and reporting. This global regulatory divergence demands banks move from siloed risk and compliance functions to integrated, real-time data-driven frameworks to maintain control and remain competitive.
Technological advances, especially AI, are rapidly reshaping regulatory expectations. AI-driven credit risk modeling and fraud detection bring efficiency but raise concerns around transparency, bias, and compliance. These issues are highlighted by bank leadership in strategic readiness discussions at investor forums.
The regulatory agenda is not just seen as compliance tasks but as strategic factors influencing operational models and capital planning. KeyBank CEO Chris Gorman notes that change in the regulatory environment may take time due to career staffers at federal agencies.
The industry would like the Basel III rule to be finalized for certainty around balance sheet management. Wells Fargo CFO Mike Santomassimo has noted a change in the regulatory tone and expects more meaningful discussion on stress test changes this year. Wells Fargo CEO Charlie Scharf has expressed some frustration about the delay in finalizing the Basel III rule.
JPMorgan CFO Jeremy Barnum has called the current situation a "shock and awe moment" and wants balanced, coherent regulation that allows banks to support the economy without conflicting with the safety and soundness of the system. Moynihan has highlighted capital requirements and consumer compliance activity as areas where rules and regulations went beyond their intended statutes.
The regulatory arena is experiencing significant change, with bank executives describing the current environment as volatile but increasingly focused on clarity, reducing unnecessary burdens, and managing emerging risks tied to technology and global market shifts. Flagstar CEO Joseph Otting states that bank supervision is an area where comptrollers can exert a fair amount of influence. Rodney Hood takes over as the acting comptroller of the OCC, and Jonathan Gould is nominated to lead the OCC.
Bank of America is one of three banks sued by the Consumer Financial Protection Bureau in December over the Zelle payments platform. Otting expects the White House to want banks active in the market. Gorman mentions the bandwidth taken up by preparing for exams, participating in the exam, and meeting after the exam.
In conclusion, bank executives are navigating a complex regulatory landscape, balancing the need for innovation with the demands of compliance. The focus is on clarity, reducing unnecessary burdens, and managing emerging risks, with the regulatory agenda seen as a strategic factor influencing operational models and capital planning.
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- In the shifting landscape of the banking industry under the new Trump administration, efforts are being made to reduce regulatory burden, particularly in areas such as finance, business, and personal-finance, by rolling back regulations like the 2023 Community Reinvestment Act (CRA) final rule to reinstate earlier regulations from 1995.
- With advances in fintech, especially AI, a key concern for bank executives is maintaining transparency and managing emerging risks, such as those related to credit risk modeling, fraud detection, and compliance, in the face of technological advancements.
- As the regulatory environment evolves, bank executives are focusing on creating wealth-management strategies that balance innovation with compliance demands, with the goal of supporting the economy without conflicting with the safety and soundness of the system. In some cases, this may involve investing in integrating real-time data-driven frameworks to manage risk and remain competitive in a global market.
