Financial institutions anticipated that a focus on deregulation in a second Trump Administration would lead to fewer regulatory changes and reduced compliance costs. The reality is that while the Trump Administration has deprioritized enforcement, it is working to reverse rules issued under the Biden Administration. Financial institutions continue to face increased challenges and costs in monitoring changes to laws, rules, guidance, and policy updates under a deregulatory agenda. Deregulation is still regulation.

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In addition to federal regulatory changes, the introduction of aggressive and expanded rules and legislation at the state level, as well as a disconnection from global financial reform efforts since the financial crisis, has created a complex web of regulatory changes to monitor and react to. Financial institutions have had to expand beyond prioritizing federal banking regulatory agencies and have moved to increasingly monitor regulators in the EU, UK, and Asia for predictability and stability in the regulation of the financial system. They are increasingly required to capture actions and forward-looking regulatory regimes, such as those of key international bodies (e.g., the Basel Committee on Banking Supervision, the Financial Stability Board, and the G20), on climate change, ESG, operational resilience, digital assets, open banking, and capital requirements.

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In the US, financial institutions have expanded their monitoring and regulatory change management programs to address oversight by state attorneys general, the offices of the governor, and other state administrative agencies. The Trump Administration's efforts to reverse policies by the Biden Administration have led states like California, New York, Illinois, and New Jersey, among others, to step in and address what is perceived as a void in oversight and consumer protections for financial institutions operating within their borders. New York, for example, has coordinated efforts across the Office of the Governor, the State Legislature, and the New York State Department of Financial Services to target financial institutions and their business practices (e.g., overdraft, cybersecurity, BNPL, etc.), aiming to 'deliver on our mission to build a more equitable, resilient, and inclusive financial system for all New Yorkers'. While deregulation can be an overall positive for financial institutions, rollbacks such as those implemented by the agencies highlight the challenge for financial institutions in weighing the extent to which they will fully adopt those changes.

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Financial institutions must assess the impact of various policy changes, including their costs and benefits, as well as how these changes may affect adjustments to products, services, business lines, and operations. This assessment must also consider the possibility that deregulation could be reversed under a future Democratic President and a Congress controlled by Democrats.

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As financial institutions look forward to 2026, the expectation is that the US will expedite the rulemaking process to ensure the Trump Administration can finalize as many regulations as possible before a potential change in control of the US Congress, where Democrats may slow or halt the rulemaking process. Financial institutions can mitigate and manage the rise in regulatory changes by broadening the scope of their regulatory monitoring programs, updating their regulatory impact analysis process to incorporate other areas of compliance and non-compliance risk, and clearly defining their appetite and tolerance.