Leaders at financial institutions across the country are expecting the second term of President Donald Trump to bring regulatory pullback, which could lead to sweeping changes in the market by giving a boost to innovation and business growth.

JPMorgan is hoping the administration will not be “anti-bank” and recognizes that banks “play a critical role in supporting growth,” Chief Financial Officer Jeremy Barnum said during the bank’s fourth-quarter earnings call on Jan. 15. 

Relaxed regulations? 

Businesses and banks alike are optimistic about the potential new regulatory era of the Trump administration, Bank of America Chief Executive Brian Moynihan said during the bank’s fourth-quarter earnings call on Jan. 17. 

“It’s hard to do business, hard to get things done [with] the rules coming out” constantly before Trump’s inauguration, Moynihan said. 

With that in mind, the Trump administration might look to revisit standing regulation within the financial services world, Jim McCarthy, founder of consulting agency McCarthy Hatch and a founding member of the Consumer Financial Protection Bureau (CFPB), told BAN. For example, regulations around open banking, Basel III and AI could face renewed scrutiny, he said.  

The CFPB on Oct. 22, 2024 passed the open banking rule which allows consumers to share their financial data with third party vendors, or Section 1033 regulation, which spurred immediate pushback from major FIs, including Bank of America, Citi and JPMorgan. 

Congressional approval would be necessary to cancel the open banking rule, McCarthy said, adding that the best the Trump administration might do on its own is push back the timeline for compliance to make it more amenable for banks. 

Repealing regulations 

Trump signed 26 executive orders on Jan. 20, rolling back many policies of former President Joe Biden’s administration. 

Among those repealed was the Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence executive order, which broadly banned AI policy that promotes development of safeguards against algorithmic discrimination and personal data abuse, according to a Jan. 20 White House release. 

The financial services industry’s attention is also on Basel III Endgame regulation, said John Pachkowski, legal analyst at international consultancy Wolters Kluwer. That regulation, finalized in 2023, requires banks to maintain higher capital reserves against their outbound credit. However the rule might be gutted, he said. 

Federal Reserve Governor Michelle Bowman, who is expected to become vice president of the central bank, has asked for the Basel III regulation to be rolled back, arguing that raising capital requirements will effect the aggregate lending capacity of the banking system and the availability of credit, particularly for less-qualified borrowers, Pachkowski said. 

M&A 

Merger and acquisition deals of $100 million or more dropped 34% in 2024 from their peak in 2021 due to low liquidity and regulatory uncertainty, according to HSBC’s Innovation Horizon banking report, published Dec. 16. 

“The Trump administration’s pro-business stance is expected to boost M&A by potentially reducing compliance costs and making the merger review process more efficient and transparent,” Dan Goerlich, partner at think tank PwC, told BAN. This will create a more favorable environment for companies to pursue mergers and acquisitions, he said.  

Larger FIs will drive M&A activity, Goerlich said, and bigger institutions may look to acquire capabilities and new products and technology, while mid-sized and FIs may focus more on scale and geographic concentration as they aim to grow. 

IPOs 

The IPO market has been subdued since 2021, David Sabow, head of U.S. Innovation Banking at $3 trillion HSBC, told BAN. Once M&A kickstarts, a pathway will be paved for many mature fintechs to go public. 

“There are around 750 or so un-exited [companies that haven’t gone public] unicorns in the U.S. alone,” Sabow said. The companies heading for IPOs will aid in returning capital to their VCs and, in turn, trickle down to startups. 

Mature companies like Plaid and Stripe, which held off their IPOs after the pandemic, could finally hit the public markets under the new administration on the heels of improving macroeconomic conditions and a relaxed regulatory environment, Benjamin Lawrence, senior analyst at think tank CB Insights, told BAN. 

As capital markets see exit liquidity, VCs will have new money available to jumpstart a new AI investing cycle, Lawrence said. 

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