(Reuters) – U.S. bank stocks showed little reaction to a report that President-elect Donald Trump’s transition team planned to severely reduce or eliminate key banking regulators, as Wall Street does not expect such a move to gain the necessary political support to get.
Trump advisers and officials from the newly created Department of Government Efficiency (DOGE) have considered possibly eliminating the Federal Deposit Insurance Corp (FDIC), the Wall Street Journal reported on Thursday, citing people familiar with the matter.
Restructuring key federal regulators would be a very complex task, ING sector strategist Marine Leleux said.
“…It would require action from Congress and despite the Republican party’s majorities in both the Senate and the House of Representatives, it would require support from Democrats, which remains very unlikely,” Leleux said.
Advisors have asked FDIC nominees whether the agency’s absorption into the Treasury Department would be possible, the WSJ reported.
US bank stocks JPMorgan Chase, Wells Fargo, Citigroup, Bank of America, Morgan Stanley and Goldman Sachs fell less than 1%.
Top executives at U.S. banks expect Trump’s new administration to pursue pro-growth policies while removing regulations seen by some as burdensome.
“Regulators will likely replace or relax banking regulations implemented during the Biden era,” said Stephens analyst Terry McEvoy. “A Republican-led Senate Banking Committee will likely play a role in some of these changes.”
The FDIC plays a key role in the financial stability of the world’s largest economy, with the Deposit Insurance Fund supporting trillions in insured bank deposits.
The series of regional bank failures last year created instability in the banking sector and added tens of billions in losses to the agency’s deposit insurance fund.
“It’s really outrageous if he’s serious about eliminating the FDIC. It’s the only regulatory agency whose professionals have the expertise and ability to handle bank resolutions,” said Mayra Rodriguez Valladares, banking and capital markets risk advisor at MRV Associates.
(Reporting by Arasu Kannagi Basil and Jaiveer Shekhawat in Bengaluru and Matt Tracy in Washington; Editing by Noor Zainab Hussain and Anil D’Silva)
