Following the passing of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), the amount of regulatory burden in the financial sector increased dramatically. In February 2014, the Mercatus Center estimated that during the first two-and-a-half years after Dodd-Frank passed, the number of regulatory restrictions faced by the financial services industry was set to increase by 50%.1 And this estimate does not even include those regulations required by Dodd-Frank that were yet to be proposed. Over the intervening decade, regulatory burden has continued to rise as regulators completed Dodd-Frank mandated rulemakings, enhanced regulatory capital, and strengthened other standards. As the number of regulations has grown, so have industry concerns that the benefits of these regulations to the financial system have waned, compliance costs have skyrocketed, and unnecessary restrictions are beginning to harm consumers, businesses, and markets.
It is little wonder that the easing of the regulatory burden on financial institutions has come into focus for lawmakers and regulatory agencies. Recent signings of executive orders by the Trump administration indicate that regulatory relief is on the horizon. The appointment of new heads of the regulatory agencies, changes to supervisory priorities, regulatory perspectives, and the manner in which enforcement is carried out will create a level of uncertainty that institutions must carefully navigate. While deregulation points to a reduction in the regulations financial institutions may be subject to, the responsibility of operating the institution in a safe and sound manner continues to fall to bank management.
Current State of Regulation
Executive Order (EO) 14192, “Unleashing Prosperity Through Deregulation,” referred to as the “ten-to-one deregulation initiative,” helps set the stage for regulatory relief. Section 3 of EO 14192 states that “whenever an executive department or agency (agency) publicly proposes for notice and comment or otherwise promulgates a new regulation, it shall identify at least 10 existing regulations to be repealed.” While the provisions of EO 14192 are not specific to banking, the regulatory agencies are actively working to align with its mandates.
On January 21, 2025, Travis Hill, acting FDIC chair, outlined the short-term priorities of the agency, which included “improving the supervisory process to focus more on core financial risks and less on process; adopting a more open-minded approach to innovation and technology adoption, specifically related to fintech partnerships and digital assets; pursing adjustments to our capital and liquidity rules; conducting a wholesale review of regulations, guidance, and manuals, including the withdrawal of problematic proposals from the previous administration.” On March 3, 2025, the FDIC made good on its promise as it moved forward with rescissions of its policy statement on bank merger transactions (Bank Merger Policy Statement) and three proposed rules, i.e., brokered deposits, Change in Bank Control Act, and corporate governance, and delayed the compliance date for certain provisions within the Signs and Advertising Rule, marking one of the first examples of regulatory relief in the banking industry.
While deregulation is top of mind for the industry in today’s environment, the desire to right-size regulatory requirements has been a topic of conversation over the last decade. For instance, in 2018, the enactment of the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA) amended several provisions of Dodd-Frank and other laws and regulations issued by the regulators, e.g., enhanced prudential standards, in order to tailor the requirements based on the institution’s size and complexity. The failures of Silicon Valley Bank and Signature Bank in 2023, which benefited from the tailored requirements under EGRRCPA, are cautionary examples showing that reduced regulatory requirements do not relieve management of their core risk management responsibilities. Even if regulators reduce examination intensity, institutions remain exposed to any weaknesses they may have in their compliance and risk management frameworks, regardless of whether they are identified by regulatory examination. For some institutions, a reduction in regulatory and examination intensity may contribute to operational challenges, reputational risk, and financial instability as management resumes the responsibility for identifying potential risk management shortcomings that were once identified by examiners.
Potential risks and challenges that institutions should be aware of include:
- Misunderstanding of the institution’s risk profile resulting from emerging risks
- Compliance complexities
- New supervisory perspectives and/or enforcement processes
- Internal control weaknesses
- Capital and liquidity levels in line with activities and risk appetite
- Reputational risk
- Documentation of new processes
Conclusion
Under the Trump administration, deregulation will come back into focus as lawmakers and agencies look to ease the regulatory burden on financial institutions. The signing of executive orders—particularly EO 14192—coupled with the appointment of new chairpersons for several of the primary bank regulatory agencies signals regulatory relief is on the horizon.
To be fully prepared for these proposed changes, it is imperative that financial institutions plan on maintaining a comprehensive compliance program and risk management framework, dynamic and forward-looking change management function, and robust systems and processes. In addition, some best practices include maintaining a focus on risks, including operational risk and the interconnectedness to financial, compliance, and reputational risks; staying ahead of regulatory changes and potential impacts to the organization; and developing an action plan.
Over the coming months, regulatory agencies as well as financial institutions may remain in a collective holding pattern while we await the next steps on regulatory relief and changes to the bank supervisory process. In the meantime, institutions can arm themselves with information and reflect on lessons learned from recent times.
If you have any questions or need assistance, please reach out to a professional at Forvis Mazars.
- 1“Dodd-Frank’s Regulatory Surge: Quantifying Its Regulatory Restrictions and Improving Its Economic Analyses,” mercatus.org, February 26, 2014.