Wall Street Says Bank Regulatory Plans Are Better Than Expected

  • New rules seen freeing up to $2 trillion of lending capacity
  • KBW Bank Index up nearly one percent following announcement

What Financial Deregulation Could Mean for Banks

The U.S. Treasury Department’s banking regulatory proposals could be even better for finance firms than they initially hoped.

Late Monday, the Trump administration laid out its highly anticipated plan for overhauling bank rules, and Wall Street likes what it sees. The proposals call for easing many of the regulations that were imposed on the industry after the financial crisis, which bankers have frequently complained about in the seven years since the passage of the Dodd-Frank Act.

Bank stocks have also been reacting positively to the news, with the KBW Bank Index outperforming the broader markets today.

Here’s a look at what Wall Street as a whole is saying.

Credit Suisse, Susan Roth Katzke

“Simply put, the recommendations -- and they are extensive -- are consistent with, if not more constructive and more detailed than we had anticipated.”

Goldman Sachs Group Inc., Richard Ramsden

“In its report to the president on ‘core principles’ on financial regulation, released late on June 12, the Treasury proposes a variety of changes to financial regulation involving capital and liquidity requirements, stress tests, the Volcker Rule, and residential mortgages, among other changes. Most of these would require a formal rule-making process by multiple regulatory agencies, but relatively few would require legislation. This suggests that many of the recommendations are likely to eventually be implemented.”

Bank of America Corp., Erika Najarian

“The Treasury report proposes to relax certain prudential regulation, which in aggregate could free up to $2 trillion of lending/balance sheet capacity, or 11 percent of GDP. These proposals in particular go beyond market expectations, which have been mostly focused on more relaxed interpretation of current rules rather than actual change in rules and standards.”

Cowen and Co., Jaret Seiberg

“The most bullish indicator from this report is how it was released. There was not a big press conference or a series of tweets from the president. It was a rather simple press release with a link to the full report. We see this as positive for actually adopting changes discussed in the report. This is because it will be up to the regulators that President Trump nominates to implement the plan. Legislation is unlikely given the unwillingness of Senate Democrats to act.”

FBR Capital Markets and Co., Edward Mills

“The proposed changes are greater than what was reported in advance of its release. Initial focus will likely center on the more well-known aspects of the Dodd-Frank Act, such as the CFPB and Volcker Rule and the difficulty of getting Congress to adopt any changes. However, the more impactful parts of this report are the proposed changes to the lesser known provisions of the Act, such as the supplemental leverage ratio or fundamental review of the trading book.”

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