The next phase of Trump's banking reforms won't be so easy

Bloomberg News

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• Key insight: Bank regulators in Washington have been uniquely unified under the second Trump administration, advancing a sweeping reform agenda. Whether they will be able to round out their agendas without old fault lines re-emerging is another question. 
• Expert quote: "A lot of the big-picture items have been already to some degree addressed. For the issues that they're going to be working on [going forward], there's less of an obvious interagency meeting of the minds on what the ultimate objective is." — Christopher Appel, director of banking policy, Better Markets

The second Trump administration has seen sweeping changes and unprecedented harmony among Washington's bank regulatory agencies. Now comes the tricky part.

Since the beginning of last year, the Federal Reserve, Federal Deposit Insurance Corp. and Office of the Comptroller of the Currency have marched in lockstep through an ambitious regulatory agenda: easing capital burdens, fixing supervisory scrutiny on financial issues, reducing the volume of citations and speeding up merger approvals.

These reforms have largely fit into three distinct categories. Some have addressed longstanding deficiencies, others have canceled out Biden-era reforms and still others have satisfied political priorities raised during Trump's presidential campaign. But once the agencies finalize their Basel III capital framework — likely sometime in the coming weeks — they will be left to sort through a thornier set of issues that are harder to build consensus around.

"A lot of the big-picture items have been already to some degree addressed," said Christopher Appel, director of banking policy at the consumer advocacy group Better Markets. "For the issues that they're going to be working on [going forward], there's less of an obvious interagency meeting of the minds on what the ultimate objective is."

Major agenda items still outstanding include revising liquidity requirements, indexing regulatory thresholds and structural changes related to stablecoins and other digital assets. 

Some of these issues have been on regulators' radars for years, but have proven difficult to resolve because of their inherent tradeoffs between different categories of banks and, in some cases, different agency objectives.

Graham Steele, deputy director of the University of North Carolina's Center for Banking and Finance and a former Treasury official in the Biden administration, said certain regulatory provisions that are critical to one agency — like liquidity requirements for the Fed's discount window operations or resolution planning for the FDIC — have little bearing on the others. 

Steele said he explored liquidity reform during his time as Assistant Secretary for Financial Institutions and found the topic to be rife with difficult questions about how the requirements should be scoped and the types of assets that should be permitted.

"There's a lot of devils hiding in the details around how to actually have liquidity and discount window borrowing work more effectively that I think are pretty hard and pretty gnarly," Steele said. "It's a thing people keep continually talking about, and yet doesn't feel like we make a lot of progress on it."

Steele said some signs of divergent opinions between agency heads have already started to manifest. He pointed to the fact that Comptroller Jonathan Gould has broken with other FDIC board members on matters related to resolution planning. 

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In June, the FDIC Board of Directors finalized a rule that would streamline reporting requirements for resolution plans and raise the threshold at which they apply from $50 billion to $100 billion. Gould voted to advance this proposal, but also issued a statement saying it "does not fully address my concerns." He also advocated other changes that would reduce the resources the agency allocates to resolution plans.

"As I contemplate a final rule in this area, I will also seek changes in FDIC structure and staffing that reduce bureaucratic incentives to perpetuate or expand this exercise in the future," Gould said. "Board focus and FDIC resources are better spent rebuilding resolution execution capabilities than perpetuating the compliance exercise known as resolution planning."

It was neither the first nor last time the OCC head broke with the rest of the FDIC board. He abstained from a vote on issuing broad resolution plan feedback in May as well as specific feedback to American Express in September, citing concerns about "faults and abuses" in the resolution plan framework.

Other areas of distinction between agencies have also arisen in recent months. Last summer, all three agencies moved to rescind their 2023 modernization of the Community Reinvestment Act — one of the marquee accomplishments of Biden era bank policy — but this past July only the FDIC and OCC moved forward with a proposal for a new framework.

Similarly, in August, the FDIC and OCC finalized a rule defining unsafe and unsound practices for the purposes of bank supervision and enforcement. The Fed adopted similar principles but wrote them into its statement of supervisory operating principles. While the two approaches have the same effect in the near term, the Fed's change could be more easily reversed by future Fed leaders. 

There have also been more superficial distinctions between the agencies. All three issued their proposals codifying their roles in stablecoin issuer oversight — as defined by the GENIUS Act of 2025 — at different times, with OCC's coming out in February, the FDIC's in April and the Fed's in September.

Patrick Fuller, a lawyer in Debevoise & Plimpton's banking group, said it is not surprising to see the Fed falling slightly out of step with the other agencies, given its structure. 

"The [Fed] board tries to get a broad consensus or agreement among its members before moving forward with a rulemaking, and the OCC and the FDIC, as they're currently operating, are much more centralized," Fuller said. "When you have to try to get all seven members to agree, that process takes longer."

In this sense, the dynamic between the three agencies seems to be reverting to its mean state, with the OCC hewing closest to the priorities of the administration, the Fed operating within the bounds of its own internal politics and the FDIC somewhere in between.

That the agencies were as unified as they were in the initial months of the second Trump administration speaks to the unique circumstances and moment in time. The three heads — Fed Vice Chair for Supervision Michelle Bowman, FDIC Chair Travis Hill and Gould — had experience working in their respective agencies and were installed in their current positions swiftly.

"When [Gould, Hill and Bowman] took the reins last year, things moved much quicker than under the first Trump administration and those agency heads deserve a lot of credit," said Hugh Carney, executive vice president for financial institution policy and regulatory affairs for the American Bankers Association. "The regulatory framework now better reflects the size, complexity and business model risks of the banking industry."

The group also had a well-defined playbook ready to go, much of it spelled out by Bowman through her many speeches and dissenting votes as a member of the Fed Board of Governors. Given the Fed can be the slowest moving and most deliberative of the three agencies, having her spearhead the reform push proved to be pivotal.

Recent actions indicate that the Fed is once again becoming the slow-mover and outlier of the group, which Steele said is to be expected. 

"Some of that divergence is likely a testament to both the institutional independence of the career staff and the extent to which the agency is driven by those long-term staffers who can push back even on the political appointees," he said. "Then there is the disposition of the board itself. Because it is insulated from removal and there's a more diverse set of views on the board itself, it's harder to get some of the things that feel expressly partisan or ideological through that group of people."

Whether the agencies can round out their respective and collective goals for bank policy reform will be seen in the years ahead. What has been proven, though, is how fast regulations can be changed when agencies are aligned with one another.

Jarryd Anderson, a partner at the law firm Ropes & Gray, said banks should be wary of this ability for policy to swing drastically from one administration to another.

"The durability of some of these changes remains to be seen, but typically things can be undone just as quickly as they are done — if not faster," Anderson said.