REG TALKS: Basel Endgame - Shaping Financial Regulation in the Trump 2.0 Era

On December 11th 2024, we hosted an insightful webinar, Basel Endgame: Shaping Financial Regulation in the Trump 2.0 Era, featuring expert panelists Douglas Elliott, Partner at Oliver Wyman, and William Coen, former Secretary General of the Basel Committee on Banking Supervision. Moderated by James Bowpitt, the discussion explored the potential trajectory of financial regulation under a hypothetical Trump second term, with a focus on the Basel III Endgame, deregulation, and its domestic and international implications.
Key Themes Discussed:
1. A Renewed Push for Deregulation
The panelists agreed that financial deregulation is likely to be a central theme in a Trump 2.0 administration, with the president leveraging his experience and a trusted team to advance his agenda. Potential areas of focus include reducing capital requirements, revisiting supervisory frameworks, and loosening prudential standards such as the enhanced supplementary leverage ratio. However, this deregulatory push will likely face constraints from existing legislation like Dodd-Frank and the realities of a divided Congress.
2. "Personnel is Policy"
Panelists highlighted the critical role personnel changes will play in shaping the administration's regulatory approach. Trump's expected preference for appointing aligned individuals, including potential candidates like Travis Hill (fdic) and Mickey Bowman (Fed), suggests a deregulatory philosophy at the helm. The use of acting appointments may expedite these changes, ensuring swift movement on key priorities.
3. The Basel III Endgame
The panelists offered a detailed discussion on the prospects of finalizing Basel III under the Trump administration. While industry and political dynamics could delay implementation until as late as 2028, there is optimism that the framework will be completed if it remains capital-neutral or marginally favorable to U.S. banks. Calibration remains the primary focus, with banks pushing for adjustments that ensure competitive parity and minimal impact on their operations.
4. Balancing Supervision and Deregulation
Supervision emerged as a more challenging area for reform than regulation due to the ingrained culture and incentives among regulators. Despite deregulatory ambitions, events like the Silicon Valley Bank failure underscore the critical importance of robust supervisory practices. Achieving a balance between these priorities will be key to maintaining financial stability.
5. Emerging Focus on Crypto and AI
Both panelists anticipated regulatory frameworks for crypto and artificial intelligence (AI) under a Trump administration. The objective would be to establish clear guardrails without stifling innovation, aligning with industry calls for regulatory clarity. These frameworks would reflect a light-touch approach, fostering growth in these emerging sectors.
6. Navigating International Dynamics
The discussion explored the potential role of the U.S. in global regulatory bodies like the Basel Committee and the Financial Stability Board. While a complete withdrawal from these organizations appears unlikely, the U.S. may act as an anchor, slowing international initiatives that do not align with domestic priorities. The importance of strong international banking systems to U.S. economic interests was emphasized.
Conclusion:
This webinar provided a comprehensive analysis of the potential direction of financial regulation under a Trump 2.0 administration. From deregulation to Basel III and emerging technologies like crypto and AI, the panelists emphasized the importance of thoughtful calibration and strategic policymaking. The discussion underscored the challenges of balancing economic growth, financial stability, and international cooperation in a complex global landscape.
We thank Douglas Elliott, William Coen, and our moderator, James Bowpitt, for their invaluable insights and our audience for their engaging participation. Stay tuned for future webinars as we continue to explore pivotal topics in finance and policy.