Experts: Trump administration bringing reg tailoring, not removal

The Trump administration is prioritizing bank regulatory tailoring, not deregulation, industry experts said Jan. 15 during a panel discussion hosted by law firm Holland & Knight..The administration has refocused its efforts surrounding the Bank Secrecy Act/ anti-money laundering standards to being risk-based and tech-centric, said Partner Andy Fernandez. Trump is also focusing more on financial crimes perpetrated by foreign cartels and terrorist organizations than previous President Joe Biden, he added. Fernandez disputed assertions that the administration is prioritizing deregulation and amending or repealing entire regulations. Instead, he sees Trump as wanting to reduce the burden some financial institutions face without wiping away existing banking rules. In September, the Office of the Comptroller of the Currency created three separate supervisory lines for large, midsize and community banks, which Fernandez said signals regulatory tailoring instead of a one-size-fits-all mindset. The Financial Crimes Enforcement Network is taking a more surgical, peer-to-peer approach than the broader net it had during the Biden administration, Fernandez said. This month, FinCEN announced a Geographic Targeting Order of banks/money service businesses in Minnesota to report international funds transfers of at least $3,000. Congressional action has been stymied recently due to thin Republican majorities in the House and Senate, said Ron Klein, a member of Holland & Knight’s policy and regulation group. Financial services has recently not been seen as a hot-button issue comparable to health care and immigration in Congress, he added. Both the Trump administration and Republican Congressional leaders support the crypto industry, Klein said. In July, Trump signed the GENIUS Act, which established a regulatory framework for the nascent stablecoin industry. One point of contention is whether crypto issuers should be allowed to pay interest on deposits. Banks have expressed concern that allowing crypto issuers to pay yield would threaten traditional bank lending and harm local communities. CFPB The Consumer Financial Protection Bureau has survived two Supreme Court cases and dozens of bills seeking its elimination over the past 15 years, said Holland & Knight Partner Eamonn Moran. Following a court ruling that the bureau must seek funding from the Federal Reserve, Acting CFPB Director Russell Vought requested $145 million for the agency to cover the next three months. The administration had alleged the CFPB was not legally authorized to accept funds from the Fed. Despite the unsuccessful initiatives, the CFPB has significantly downsized during the Trump administration. Moran said further changes to the bureau are unlikely this year and the agency could return closer to its former composition after Trump leaves office. Moran expects fewer initiatives will likely be unveiled during the next three years under Trump, with other regulatory agencies filling the gap. The Federal Trade Commission has picked up the bandwidth on the CFPB’s UDAAP authority, said Brian Goodrich, a member of Holland & Knight’s consumer protection defense and compliance team. Rohit Chopra, who directed the CFPB during the Biden administration, is now working with the Democratic Attorneys General Association, leading a new working group on consumer protection/affordability. The Office of the Comptroller of the Currency and FDIC will try to streamline the creation of new banks this year, predicted Rolland Hampton, a regulatory attorney in Holland & Knight’s Washington, D.C., office. FDIC Chair Travis Hill supports lowering capital requirements for new banks. Last year, the OCC and FDIC banned regulators from criticizing or taking adverse action against a bank or employee based on reputational risk. They have also changed the frequency and scope of bank examinations to be tailored to the bank’s size or risk profile.