Future Federal Regulations: What Financial Services Could Expect

President-elect Donald Trump has yet to announce detailed plans regarding regulations for financial services, but the industry can get insight from actions taken during his previous administration.

His previous financial services industry policies were characterized by significant tax cuts and deregulation. While they aimed to stimulate economic growth and boost business profitability, these policies also introduced challenges related to market stability and regulatory oversight. The long-term impact of these policies on the financial sector and the broader economy continues to be a subject of analysis and debate.

Explore more about Trump’s financial services industry record and potential impacts.

Prior financial services industry policies

The impact of tax cuts on the financial sector

Reduced corporate taxes during Trump’s previous term benefited many financial institutions by increasing after-tax earnings. Many banks and investment firms experienced significant boosts in profitability, which in turn influenced stock market performance positively. Higher profits for financial firms often meant increased capital available for loans and investments, stimulating broader economic growth.

Interest rates and monetary policy

While the Federal Reserve operates independently, past preference for lower interest rates could influence the broader economic environment for financial institutions.

Deregulation efforts

Trump's previous administration pushed toward deregulation, particularly in financial services. Key regulatory changes included rolling back several provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which were enacted in response to the 2008 financial crisis.

Capital requirements and stress testing

Trump also previously focused on modifying capital requirements and stress testing for banks. The changes were intended to reduce compliance requirements on smaller banks while maintaining the robustness of the financial system. Adjustments to the frequency and scope of stress tests were intended for banks to remain resilient without stifling operational flexibility.

Consumer Financial Protection Bureau (CFPB) changes

Under Trump, the CFPB — created to protect consumers in the financial sector — saw significant changes in leadership and approach. This included reducing enforcement actions and focusing on promoting market competition.

Potential economic impact

Economic growth

The combination of tax cuts and deregulation is designed to spur economic growth, including business expansion and investment.

Market volatility

Deregulation in financial services can raise concerns about the possibility of increased risk-taking by financial institutions. This could lead to heightened market volatility and systemic risks if not managed properly. 

Regulatory oversight

Deregulation presents some concerns about adequate regulatory oversight. While fewer regulations may promote business efficiency, it also may pose risks to financial stability and consumer protection.

Election snapshot: Learn about the new administration’s broader proposed tax policies and possible congressional influence.

How CLA can help with financial services regulations

Changing federal regulations are always a concern for financial services and with a new administration taking over, new rules are likely. CLA’s financial services team follows regulatory changes and their impacts closely and plans to stay-on-top of upcoming announcements. Reach out for assistance on staying informed and in compliance.