Banking’s Regulator Rollback Could Unleash $2.6 Trillion in Lending Capacity

American banks could realize $2.6 trillion in lending capacity amid relaxing financial regulations.

That’s according to a report Sunday (Oct. 12) by the Financial Times (FT), citing research from consultancy Alvarez & Marsal. Those findings show that the upcoming regulatory rollback will likely open up nearly $140 billion in capital for Wall Street lenders.

As the report noted, the U.S. government has taken a much more bank-friendly stance on regulations since Donald Trump returned to office, pledging to relax several rules requiring financial institutions to boost their capital buffers in the wake of the 2008 financial crisis.

With regulations easing, the FT said, big banks will have more room to fund big investments in artificial intelligence (AI) and data centers, and let them provide greater returns to shareholders.

“We think the Trump administration is kicking off a major wave of deregulation, unlocking a huge amount of capacity, which will give a massive economic boost and an earnings uplift,” Fernando de la Mora, co-head of financial services at Alvarez & Marsal, told the FT.

His group’s report, due Monday (Oct. 13), predicts that American banks would enjoy 14% reduction in capital buffer requirements, while regulators in the U.K. would follow suit by reducing British banks’ capital requirements by roughly 8%. The report also projects that European regulators will keep increasing their capital requirements for banks.

The report follows a week in which U.S. financial regulators detailed some upcoming changes to the way they govern banks.

For example, the Office of the Comptroller of the Currency (OCC) announced new guidance and proposed rulemakings it said were designed to to reduce “regulatory burden” for community banks and stimulate economic growth.

In one bulletin Oct. 6 the OCC said it is swapping out fixed examination requirements for community banks with a tailored examination scope and frequency more in keeping with risk-based supervision.

In a second bulletin, the regulator said that it will use only the core assessment standards in the Community Bank Supervision booklet of the Comptroller’s Handbook when examining retail non-deposit investment products.

The following day, the OCC and the Federal Deposit Insurance Corp. (FDIC) issued a notice on joint rulemaking designed to “promote greater clarity and certainty” in supervision and enforcement.

The goal is to codify what qualifies as an “unsafe or unsound practice” under the Federal Deposit Insurance Act, as regulators move to “prioritize material financial risks over concerns related to policies, process, documentation and other nonfinancial risks,” the notice said.