Regulation

Banks Like The Trump Regulatory Regime

When Donald Trump ascended to the presidency, he promised to radically scale back the reach and power of Dodd-Frank, the 2010 law designed to rein in excesses on Wall Street.

A year later, Dodd-Frank still remains on the books in full — though there is some motion on a bill that would dial it back a bit.

Nonetheless, according to Financial Times Reports, Wall Street is warming to the Trump regulatory era. An era that is, primarily, defined by lack of regulation on the whole — since Trump took office no major new financial regulations have been imposed or even really considered.

The Trump Treasury has also been instrumental in bringing Wall Street on board, as the new vision involves bringing down the level of regulatory burdens on the banking industry. Going hand-in-hand with that change is the actual regulatory supervision of banks, which has been described as “less abrasive” under new regulators that are less interested in micromanaging the FIs under their care.

“You could take any provision in [Dodd-Frank], and you could have a very strict or moderate or liberal interpretation,” says Terry Dolan, chief financial officer of US Bancorp, America’s fifth-biggest bank by assets. “Just the tone at the top has changed; it’s a little bit more pro-growth and pro-market.”

The top US regulator Randal Quarles noted in public remarks recently that the priority of financial regulation in the new era is “efficiency, transparency and simplicity.”

The CFPB has also undergone a major reset, as acting chief Mick Mulvaney has seemingly been working overtime to dismantle the legacy left behind by the agency’s first director, Richard Cordray.

“The CFPB has made it abundantly clear it will scale back its activities and operations,” says Charles Horn, partner at Morgan Lewis in Washington.

Also undergoing major renovations is the Office of the Comptroller of Currency, which is currently under the direction of  Joseph Otting, former chief executive of OneWest Bank and a close associate of Steven Mnuchin. The OCC is currently taking a look at the Community Reinvestment Act (CRA), a law that forces insured banks meet the credit needs of the communities in which they are chartered.

Last October, the OCC said it would no longer consider violations of other laws unrelated to the CRA when determining a bank’s CRA rating.

“Unlike a lot of banking law, the CRA is fairly short and amorphous and puts a lot of discretion in the hands of the regulatory agencies to define requirements,” says Warren Traiger, senior counsel at Buckley Sandler, a law firm in New York. “They can pretty much change it any way they want.”

The OCC has also been reconsidering its position on short-term lending — and may reverse Obama-era guidance that essentially made it impossible for banks to economically compete in the market against payday lenders.

“Some segments of customers can benefit from this type of product, and we believe regulated banks are a better place for it to happen than payday lenders,” says Citizens Financial Group, which is weighing its options.

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