Since 2024, the Trump administration has been exploring plans to consolidate the United States’ federal financial regulators. Talks of restructuring key institutions, such as the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC), first emerged last year. Now, momentum is building, with recent reports suggesting that these proposals are moving closer to becoming reality.
As these consolidation plans gather pace, they have sparked a mixed response within the banking community. Some industry professionals welcome the move, expecting a more efficient and streamlined regulatory framework. Others, however, are raising concerns about the potential impact on the independence and effectiveness of financial oversight.
But what does this mean for RegTech firms? Here is a list of potential effects, and possible next steps:
- There may be fewer regulators, but this will come with more complexity:
If organisations such as the FDIC, OCC, CFPB, and CFTC are merged or restructured, institutions will have fewer regulatory bodies to navigate. However, the transition could bring a period of uncertainty, with potential changes to regulations, revisions to reporting requirements, and shifts in agency responsibilities.
- Increased Demand for RegTech Solutions:
As firms struggle to adapt to new oversight structures, automated compliance solutions will be in high demand. If regulators consolidate their data/reporting standards, there could be a push for standardisation.
- Changes in Data Sources:
Agencies could potentially centralise their databases, meaning that RegTech firms will need to adjust how they collect, organise, and categorise data from regulator websites.
- Possible Deregulation will mean less frequent updates:
If the administration relaxes certain compliance rules, such as easing Bank Secrecy Act requirements, regulatory changes may become less frequent, potentially diminishing the volume of regulatory monitoring information and regulations. However, financial institutions will still need to stay on top of evolving regulations.
- Opportunities in State Level Compliance:
If federal oversight is scaled back, state regulators, such as the NYDFS and California DFPI, may take a more active role in enforcement. This could mean a greater need to cover state-specific regulations, as financial institutions seek guidance beyond federal authorities.
What can RegTech firms do now?
- Track Changes – Stay updated on agency consolidations and shifting regulations.
- Adapt APIs – Be prepared to update data sources and compliance tools.
- Cover States – Strengthen state-level regulation coverage if federal oversight weakens.
- Guide Clients – Help businesses navigate the transition.
Has there been a surge in regulatory changes?
The Economic Policy Uncertainty Index: Financial Regulation (EPUFINREG) from the Federal Reserve Bank of St. Louis tracks financial regulatory uncertainty. Recent data shows fluctuations in the publication of regulatory changes and notices: 112.08 (Oct 2024), 92.68 (Nov 2024), and 46.48 (Dec 2024).
The fluctuation in the EPUFINREG index reflects rising regulatory uncertainty, amplified by the Trump administration’s push to centralise financial regulators. This potential consolidation increases the need for RegTech firms to provide agile solutions, helping financial institutions stay on top of evolving regulations and adapt quickly to changes in oversight. Please see below link for more details.
What does this mean for the rest of the world?
Trump’s decision to centralise U.S. financial regulators could prompt other countries to reconsider their own regulatory structures, potentially leading to global regulatory shifts. This could create a more unpredictable landscape for international firms, driving up demand for RegTech solutions to manage evolving compliance challenges across borders.
Alison Radu, Solutions Consultant Corlytics