The Great Regulatory Unveiling: What's at Stake for U.S. Banks?

There have been several developments since the beginning of the year that affirm the current U.S. administration's banking deregulatory agenda is now well under way. This commentary assesses the potential impact of regulatory rollbacks on the U.S. banking system.

Key highlights include:
-- After over a decade of stricter oversight and higher capital and liquidity requirements, the banking regulatory pendulum is now swinging back in the other direction.
-- Leadership overhauls across the regulatory agencies have set the stage for broad regulatory rollbacks. Indeed, there are already proposals for changes to the annual Fed stress test, as well as speculation on a broader proposal for easing capital requirements.
-- Our view is that broad regulatory rollback, although likely neutral in its effect in the near term, could nonetheless increase vulnerabilities within the banking system over the medium to long term.

"We continue to closely monitor regulatory developments as well as the direct and indirect impacts that potential changes may have on the resiliency of the overall U.S. banking industry," said Eric Chan, Vice President, North American Financial Institution Ratings. "Nonetheless, our view is that the industry remains sufficiently capitalized to absorb any potential storms that may be coming our way."