On Thursday, May 24 United States President Donald Trump signed into law a bill that will provide community and regional banks in the U.S. relief from the 2010 Dodd-Frank Act.
It is early in the push for deregulation, but the Trump administration ultimately hopes to lower compliance costs and allow potentially more lucrative trading for community banks south of the border. Regional banks will also potentially lower compliance costs and the deregulation could encourage more mergers amid mid-size banks. Many of these reforms have even received support from moderate Democrats, but deregulation for larger institutions is moving much slower.
The expectation for larger lenders is that the leverage ratio rule will be modified to exempt cash from calculation, and will also change the method of calculation. This could theoretically allow larger banks to grow deposits. Softening elements of the Volcker rule also has the potential to lower compliance costs for the major U.S. banks. In spite of some progress for the small-scale institutions, many large U.S. banks retreated on May 24.
Goldman Sachs Group Inc. (NYSE:GS) fell 0.72% as of close on May 24. Shares of Goldman Sachs have now dropped 7.3% in 2018 as U.S. indexes have suffered since late January. JPMorgan Chase & Co. (NYSE:JPM) dropped 1.12% on the same day. Its stock has climbed 4% in 2018.
The push for deregulation from the administration may hinge on the performance of the GOP in the upcoming midterm elections. The Democrats had anticipated a “blue wave” since Trump’s approval numbers fell after inauguration, but the Republicans have made up significant ground in recent months.
