Amid a broad drop in equities in the U.S., bank stocks were down relatively more, as a sector, hit in part on concerns over just how much rollback of regulations tied to the sector may actually be realized under the nascent Trump administration.
Bloomberg reported that Steve Mnuchin, currently going through the confirmation process for Treasury Secretary, has said he is against allowing Wall Street firms to trade risk with their own capital. Such trading is tied to the Volcker Rule, said the newswire, which keeps federal deposits owned by banking customers away from trading by banks to generate returns. That prohibition, said Mnuchin in a letter to the Senate, should extend to insured and non-insured financial entities.
The Mnuchin comments are signaling that Dodd-Frank may undergo a “tweaking process” rather than a whole-scale surgery. For banks, the implication is that capital restrictions may not be freed up as readily as they might like. Mnuchin also said that changes should come piecemeal to Dodd-Frank, with commentary to the Senate Finance Committee that regulation should be viewed through the prism of “empirical assessments” that would gauge impact on the financial arena at large. And in addition, he said that rules shown to safeguard public safety, as Bloomberg noted, should not be lumped in with the broader regulatory freeze that has just been put in place by Trump.
With roughly one hour left in the trading day on Monday (Jan. 30), Bank of America shares were down 2 percent, Wells Fargo was off 1 percent and Citigroup common stock was down 1 percent.