### Trump’s Second Term Could Bring Significant Shifts in Financial Regulation

As Donald Trump prepares for his second term in the White House, the financial regulatory landscape braces for seismic changes. Trump’s transition team is more seasoned than during his first term, according to Peter Dugas, executive director at Capco, suggesting a swift implementation of new policies. Major shifts are anticipated in areas like capital requirements, mergers and acquisitions, AI, and ESG.

Among the most contentious issues is the proposed increase in capital requirements for the largest U.S. banks. A proposal initially advocating a 19% hike was scaled back to 9% but faced resistance from Federal Reserve partners, especially the FDIC, whose board members Jonathan McKernan and Travis Hill opposed it. Rohit Chopra, CFPB Director and FDIC board member, also criticized the compromise, deeming it a concession to Wall Street banks. With the incoming Congress, the proposal’s future looks uncertain, potentially facing a complete overhaul or withdrawal from the Basel III accord.

Expected changes at regulatory agencies include the Federal Reserve, FDIC, Office of the Comptroller of the Currency (OCC), SEC, and CFPB. Michael Barr’s term as the Fed’s vice chair for supervision ends in 2026, but historical trends suggest he may resign sooner. Michelle Bowman is considered a likely successor. Trump's relationship with Fed Chair Jerome Powell remains contentious; however, Powell might be permitted to serve out his term until 2028. Ailing from similar dynamics, FDIC Chair Martin Gruenberg is expected to resign or be dismissed immediately after Trump’s inauguration.

At the SEC, Chair Gary Gensler is expected to face dismissal, although legal challenges might complicate such a move. The CFPB’s Rohit Chopra might also face replacement owing to his stern regulatory stance. Another anticipated change could involve Michael Hsu, Acting Comptroller at the OCC, who lacks Senate confirmation.

The Senate Banking Committee will also witness a shift in power dynamics as Republican Bernie Moreno defeated Sen. Sherrod Brown, with Sen. Tim Scott of South Carolina emerging as the likely chair. The committee’s Democratic ranking member is yet to be determined, as Sen. Jon Tester of Montana also lost his reelection bid, leaving Sen. Jack Reed, Sen. Mark Warner, or Sen. Elizabeth Warren as potential candidates.

Despite these upheavals, the recent CFPB open banking rule issued on October 22 might remain intact in the immediate future. With the 60-day Congressional Review Act window expiring on December 31, the rule could sidestep challenges from the incoming Congress.