The 2024 presidential election and recent shifts in the Supreme Court are poised to bring significant changes to the banking industry. These developments will likely set the stage for next year and the long-term future of banking in the United States. Let’s explore what’s already in motion as we head into 2025.
ROLLBACK ON THE CHEVRON DEFERENCE
Earlier this year, the Supreme Court, in the Loper Bright case, overturned the Chevron deference doctrine, which had guided judicial review of administrative agency rulings for over 40 years. Under Chevron deference, federal courts generally deferred to decisions made by administrative agencies—such as the Office of the Comptroller of the Currency, FDIC, Federal Reserve, or FTC—regarding rules, regulations, or enforcement actions, as long as those decisions were not deemed an abuse of discretion. This doctrine significantly shaped how courts evaluated agency interpretations of their statutory authority.
This meant that a court would only overturn or reverse an agency’s decision if it determined that the agency had abused its broad discretion in adopting, applying, or enforcing a rule. As a result, agencies historically held significant authority in interpreting their rulemaking powers granted by Congress, as well as in creating, implementing, and enforcing those rules.
“Following Loper Bright, there has been a noticeable increase in case activity challenging longstanding agency interpretations that industries have found burdensome.”
When courts rolled back Chevron deference, it became significantly easier for banks or private parties to challenge a federal agency’s interpretation or application of a rule. For example, agency rules related to capital requirements or fair lending—often shaped by the agency’s discretion—may now face closer scrutiny by the courts. In many cases, these rules will be subject to more rigorous judicial review. This is particularly true for new rules where an agency has adopted a broad interpretation of its rulemaking authority, making such rules more vulnerable to legal challenges.
We are already beginning to see the effects of this shift. For instance, the CFPB’s rules under Sections 1071 and 1033, addressing small business reporting and open banking, have faced early and swift legal challenges. These challenges are now being evaluated under a new standard of review, signaling a potential trend.
Following Loper Bright, there has been a noticeable increase in case activity challenging longstanding agency interpretations that industries have found burdensome. This trend is likely to extend across banking and other heavily regulated industries, as companies take advantage of the reduced deference granted to agency rulings.
Presidential Administration
Following the Loper Bright decision, the contentious presidential campaign season culminated in the re-election of President Trump for a second term, a rare occurrence in U.S. political history. This development provides unique insight into how President Trump may approach policy direction, rulemaking, and agency priorities in the coming months.
Looking back at his first term, we can expect to see similar themes, methods, and priorities emerge in this term, likely shaping the administration’s approach to regulatory agencies and their policymaking processes.
To be more specific, let’s start with agency administration. Leadership at agencies like the OCC (Office of the Comptroller of the Currency) and FDIC is appointed by the president, so we can likely expect shifts in leadership at these institutions. Similarly, changes in leadership are also a posibililty at the Consumer Financial Protection Bureau (CFPB) as the administration moves to align these agencies with its policy priorities.
When a new agency head is appointed, we often see changes in how regulations are enforced and how applications are processed. Priorities shift, and the new leadership may approach certain aspects of a rule, regulation, or application differently than their predecessors. This leads to a tangible shift in priorities, processes, and potentially the ease with which certain actions or approvals are handled.
In this term, many processes may become noticeably easier compared to the previous administration. We may also see existing rules rolled back. For example, the industry has already challenged rules under Sections 1071 (small business reporting) and 1033 (open banking).
A new director at the CFPB could bring a different perspective on the direction of these rules, potentially leading to their rollback. If the CFPB decides to withdraw these rules, ongoing legal challenges could be halted. Additionally, we might see delays in the introduction of new rules under the agency’s restructured leadership.
Congress
Another potential development is the use of the Congressional Review Act. This act allows a majority in Congress to overturn proposed rules issued by federal agencies. As a result, Congress could review certain rules in progress and decide to reject them, preventing their finalization.
Before the election, there had been plans to focus on mergers and acquisitions this month, but these legislative and regulatory shifts may take precedence in shaping the discussion.
POSSIBLE ELECTION IMPACT ON MERGERS
In light of the election, it’s worth considering how a presidential administration might influence the way mergers and acquisitions are processed for banks in the United States. Unlike many industries, banking mergers are subject to a regulatory process. A merger application must be submitted and approved by the appropriate agency.
Depending on the type of institutions involved, the application might be reviewed by the Office of the Comptroller of the Currency (OCC), the FDIC, or, in some cases, the Federal Reserve. The Federal Reserve’s involvement typically depends on the size of the merger and whether it has oversight authority over the bank in question. Changes in leadership and policy priorities within these agencies, driven by the presidential administration, could significantly impact how these processes unfold.
In the dynamics of a bank merger, the two parties collaborate to negotiate the terms and conditions of the merger. Once agreed upon, the merger must be submitted to regulators for approval. This process can significantly impact the timeline and feasibility of a deal. For example, delays in the application process—often taking several months, or even nine months or longer—can strongly influence deal terms, the likelihood of closing, and whether parties are willing to enter negotiations in the first place.
The context of the merger application is critical. Federal agencies assess various factors, including the proposed management team, the institution’s capital adequacy, its ability to comply with anti-money laundering regulations, other compliance issues, and considerations under the Community Reinvestment Act. These evaluations are key determinants in whether a merger is approved and under what conditions.
When considering the various aspects that agencies review during the merger application process, it’s clear how policy priorities driven by one administration or another can influence the pace and direction of mergers and acquisitions. An administration’s stance can either accelerate, stall, or shape activity in the broader economy.
Currently, we might expect a preference for faster review periods and a process that is generally more business-friendly, including support for mergers and acquisitions, though likely with some caveats.
Additionally, there may be increased openness to non-bank entities acquiring banks. For example, fintech companies seeking to acquire banks could see more opportunities in this environment. Similarly, there might be broader acceptance of cryptocurrency-related activity, with crypto players gaining increased access and mobility within the banking sector. While this may not extend to full bank charters, it could involve expanded access to certain banking services and infrastructure.
CONCLUSIONS
Considering the presidential election and the effects of Loper Bright, the overall business climate for banks is likely to become significantly less challenging than in recent years. We can expect reduced aggression from federal agencies toward banks, consumer lending, and financial products. Themes such as fair lending, diversity, equity, inclusion, and environmental, social, and governance (ESG) considerations may also see less emphasis moving forward.
To provide some historical context on how changes in presidential administrations can impact industries: When President Biden took office, one of his first actions was to sign a series of executive orders, often highlighted by images of him at his desk with a stack of them. These orders covered a broad range of topics, including environmental and social governance (ESG) and reporting requirements. At that time, Congress was largely gridlocked due to partisan divisions, leaving the administration to rely on executive actions to shape policy in areas that might otherwise have been addressed legislatively. This highlights how shifts in leadership can significantly redirect industry priorities and regulatory focus.
We witnessed the president’s use of executive orders and directives to federal agencies to implement reporting requirements for environmental, social, and governance (ESG) issues. These requirements affected securities issuers, such as those issuing stocks, bonds, or other financial instruments, particularly in proceedings before the SEC. ESG reporting obligations were added to the standard regulatory requirements, increasing the compliance burden for companies.
Simultaneously, federal banking agencies began issuing guidance and requirements for banks to evaluate how climate change and similar factors might impact their portfolios. This marked a significant shift toward integrating ESG considerations into financial and banking operations, influencing how institutions assessed and managed risk.
These policies introduced a new layer of evaluation for investors, particularly when assessing bonds or securities, and significantly impacted how capital was raised for industries like oil and high-carbon-use sectors. This created challenges for banks that fund these industries and for governments with policies favoring such sectors. The added scrutiny and regulatory requirements made it more difficult for these entities to secure funding.
As President Trump returns to office, one of his potential priorities could be to unwind or reverse these policies, easing the regulatory burdens on these industries. Drawing from the current administration’s playbook, he may also use federal agencies to advance his policy objectives.
Looking ahead to the next 12 to 24 months, the banking landscape is poised for change. Shifts in attitudes, policy direction, and regulatory priorities are likely, with expectations of a more business-friendly environment for banks in the United States.
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