US banks brace for election impact as Trump and Harris offer contrasting regulatory paths
US banks are closely watching Election Day, aware that the outcome could significantly influence their industry, though the precise direction remains uncertain.
Analysts believe a Donald Trump win could signal a return to more lenient regulation, potentially making corporate mergers and other profit-generating activities easier for Wall Street. In contrast, a Kamala Harris victory may imply continued scrutiny of major financial institutions, extending the regulatory approach seen under President Joe Biden’s administration.
So far, banks have thrived amid high interest rates and a rebound in investment banking and trading. With hopes that rates may ease, there’s optimism for more lending and deal-making in the coming year. This performance is reflected in the KBW Bank Index, which tracks 24 of the largest US commercial banks and has outpaced other financial sector indices and major stock indexes, with a 27% increase this year alone.
A Trump administration might spur a further uptick in financial stocks, as it did in 2016, when bank stocks surged 20% in the months following his election. However, neither Trump nor Harris has shared detailed plans for bank regulation, leaving the industry to draw from their past records.
Trump’s previous administration introduced significant corporate tax cuts and eased some regulations enacted after the 2008 financial crisis. Meanwhile, Harris’s record includes challenging major banks as California’s attorney general, showcasing her inclination to confront large financial institutions. One unresolved issue is the proposed capital rules from top regulators requiring banks to increase buffers against potential losses, aligning with international Basel III standards. The proposal has sparked resistance from banks, which have hinted at possible legal challenges should regulators enforce these requirements.
