Since Donald Trump’s second inauguration, the Federal Deposit Insurance Corp. has wasted little time reversing course on a number of fronts, and while banks have largely embraced the changes, many experts say they signal a more volatile regulatory landscape in the long term.
“The measures underscore how quickly and dramatically rules can change with a new administration, and how oversight has become increasingly polarized and partisan,” Ian Katz, managing director at Capital Alpha Partners, said. “Though the financial services industry generally favors most of the moves Trump appointees are making, the regulatory whiplash that can occur after presidential elections complicates long-term business planning.”
On Monday, FDIC regulators
The FDIC will accept public comments on its proposed rescission for 30 days. Since the rescission doesn’t introduce new regulations, it doesn’t need to be lengthy or complex, Katz said. Comment periods for proposed rules are often twice or three times as long. Katz added that the rescission signals the FDIC will likely take a far more flexible approach to reviewing mergers going forward.
“The Biden-era guidance had dictated that mergers creating banks of more than $50 billion in assets be the subject of public hearings, and that mergers resulting in banks of more than $100 billion trigger ‘heightened financial stability analysis,'” he said. “We don’t think the FDIC under acting Chairman Travis Hill, or anyone Trump nominates as chair, will feel bound to those thresholds.”
Jaret Seiberg, an analyst with TD Cowen, said the merger’s impact will likely be limited since the FDIC primarily regulates state nonmember banks, which are typically small. He noted that the agency plays little-to-no role in mergers involving large banks — such as Capital One and Discover — that often spark controversy and backlash among Democrats and their allies.
“The FDIC plays no role in large bank mergers that tend to get most of the market’s attention. It only has authority over state banks which are not members of the Federal Reserve[, that’s] why we never saw the 2024 guidelines as a hindrance to big bank dealmaking,” Seiberg said. “It means the rescinding of the 2024 guidelines is unlikely to make it materially easier to get large deals approved.”
Seiberg said the symbolic importance of this action — one of the first major deregulatory efforts by a Trump-appointee — may be more important than the actual change in policy.
“The FDIC is making clear to the banks that it regulates that there will be a new approach to bank M&A,” he said. “This doesn’t mean all deals will be approved, but we expect the agency will process transactions more quickly [and] the promise of a faster decision alone could be enough to spur more small bank dealmaking.”
The FDIC’s move to soften merger guidelines is also likely part of a broader push across regulatory agencies to soften the Biden-era stance on M&A, said Michele Alt, partner with the Klaros group. The Office of the Comptroller of the Currency — which reviews mergers involving nationally chartered banks — will likely also move to rescind its merger rules to align with the FDIC, she said.
“I would be surprised to see any of the banking agencies acting more aggressively than the other ones,” Alt said. “In other words, I don’t think [acting Comptroller] Rodney Hood wants to be seen as tougher than the FDIC or more restricted, so I wouldn’t be surprised to see that rescinded.”
While a change in the White House often brings new policy, the speed and force of the Trump administration’s rejection of its predecessor’s regulatory approach highlights a severity in policy swings between presidents.
“Every time there was a presidential election, my family [used to] ask, ‘What’s it like in Washington now that so-and-so is in office?’ And I would always say, ‘It doesn’t really change. There’s no difference, the banking agencies do their job regardless.’ It felt pretty apolitical,” Alt said. “But now, it’s much less predictable and far more subject to political shifts.”
Patrick Haggerty, a senior director at Klaros, said that while policy swings are common, the FDIC’s rejection of Biden-era policy is the latest shift in the regulatory back-and-forth that has persisted since the 2008 financial crisis.
Following the financial crisis and the passage of Dodd-Frank and the Basel III accords, regulators imposed sweeping reforms on banks, imposing stress tests and heightened prudential requirements on much of the banking industry and reorganizing duties among regulators. By the time Donald Trump took office in his first term, the regulatory focus had shifted to refining those rules, an approach known as “tailoring.” The idea was to adjust and fine-tune regulations rather than impose new layers.
Under Joe Biden, however, that trend reversed sharply, with a renewed focus on
“With Trump 2.0, the pendulum is swinging yet again,” he said. “We’ve entered a cycle of heavy regulatory buildup, followed by abrupt shifts — back and forth, back and forth — which makes it extremely difficult for the industry.”
Haggerty said the unpredictability means that, while the merger policy is relaxed for now, banks can’t fully relax, as the situation could quickly shift again.
“Companies have to be cautious in their responses because these changes may not be permanent,” he said. “There’s always the possibility of being whipped back to where we were four years ago.”
