New FDIC Chair Pledges Sweeping Bank Regulation Review
- Travis Hill is newly appointed acting head of the Federal Deposit Insurance Corporation (FDIC)
- In 2017 during his first term, Trump issued an Executive Order directing more relaxed regulation
- We will likely see major changes for the banking industry in the next three years
As reported in PYMNTS.com, the newly appointed acting head of the Federal Deposit Insurance Corporation (FDIC), Travis Hill, has announced plans for a "wholesale review" of bank regulations and guidance. This comes as the banking sector anticipates a period of relaxed regulation under the new presidential administration.
Back in February 2017 during his first term, Trump issued Executive Order 13772, outlining "Core Principles for Regulating the United States Financial System." This order directed the Treasury Department to review existing financial regulations and recommend changes to align with these principles, emphasizing the need to foster economic growth and vibrant financial markets through more rigorous regulatory impact analysis.
Hill's top priorities include:
... plans for a "wholesale review of regulations, guidance, and manuals to ensure our rules and approach promote a vibrant, growing economy."
A Focus on Fintech Partnership
(Source: FDCIC.Gov)
As banking continues to evolve, it's more important than ever that US banking systems keep up with other parts of the world in terms of technological innovation. In this area, Hill is seeking a "more open-minded approach to innovation and technology adoption," including "a more transparent approach to fintech partnerships".
This follows increased FDIC scrutiny on partnerships between banks and fintechs, particularly after the Synapse bankruptcy last year. The FDIC is looking to bolster recordkeeping requirements for bank deposits handled by third-party non-banks.
As we noted in a previous blog, financial institutions need to evaluate all technology partners and solutions -- fintech or other systems -- to ensure that their technology not only performs as presented, but the company behind it can be trusted. Disruptions to widespread systems have major impacts -- from operations to customer experience. It's one of the major reasons why FIs and service bureaus partner with OrboGraph for both check processing and check fraud detection.
"Far-Too-Costly Failures of 2023"
Additionally, Hill called for withdrawing "problematic proposals" and improving the bank merger approval process. He emphasized the need to learn lessons from the "far-too-costly failures of 2023", when several regional banks collapsed.
Overall, the new FDIC chair is signaling a shift towards a more relaxed, business-friendly regulatory environment. This presents both opportunities and challenges for banks and fintechs as they navigate the evolving landscape.
“If you look at the last administration and the number of new, significant regulations, it was eight times the number of significant new regulations versus the prior Trump administration,” Mary Erdoes, head of asset and wealth management for J.P. Morgan Chase, said at the World Economic Forum in Davos Tuesday.
“With that comes multiple millions of man hours of paperwork. Work . . . that clogs up the system and stops the economy from continuing to have that very healthy flywheel. So we’re really looking forward to that.”
What to Expect in 2025
As noted by The Financial Brand, there does not appear to be much in terms of immediate actions when it comes to terms of legislation.
"I’m not predicting any major financial legislation anytime soon, because we have narrow majorities, and so there will still be a lot of horse trading necessary to get anything through," says Alt. "The Democrats are not going to be at all inclined to assist the Republicans in, say, dismantling the CFPB."
An additional industry insider notes:
"You’ll see more immediate movement from the administration as the president signs executive orders," says an industry source, since they can go into effect quickly and without running through public negotiations nor regulatory rulemaking procedures.
For the next four years, there will most likely be some major changes for the banking world. However, financial institutions should not hold back on investing in technologies that align with streamlining the banking industry and automation.