The Trumpocalypse is upon us – on January 20 at noon local time (17:00 GMT), US president elect Donald J Trump will be sworn in as America’s 45th president with the promise to “Make America Great Again” (does anyone even know what that means?).
Trumps victory has sparked mass protests and public unrest. Trump didn’t even receive the most votes – the popular vote was won by Hilary Clinton who received over 2 million more votes than Trump nationwide by the latest count. Based on his controversial campaign and my belief that he is unqualified for the job, I am far from a Trump supporter. However, I started asking the question, the Trumpocalypse must be good for something? Anything? The answer: By easing regulation, could Mr Trump make banking great again?
On the Great Again transition website (www.greatagain.gov), Mr Trump writes about dismantling the Dodd Frank Act (2,300 pages of reform!) stating that bureaucratic red tape is not the answer. This will be a huge victory for the big banks, who have spent billions of dollars annually to meet regulatory requirements while negatively impacting growth and profitability, and the smaller banks who are unable to keep up with the pace and cost of regulatory change. We are still devoid of policy details but expectations from Mr Trump’s camp include freezing all new regulations, regulatory exemptions for smaller banks, and repealing Dodd Frank, which includes the Volcker Rule restricting prop trading (where a bank can trade assets on its own behalf). It’s early days but if these expectations come to fruition, this could lead to deregulation in other regions of the world, renewed focus on growth projects, and a shift in banking business models as they adapt to new frameworks and policies.
This all sounds great for the banking industry but a few words of caution. Firstly, Trump mentioned it’s time to reinstate the Glass-Steagall act, separating retail and investment banking, contradicting his non regulatory stance. So is he pro regulation or anti regulation? (Note – Trump mentioned Glass-Steagall prior to his election, but there is no mention of it on his transition website so he may be backtracking). Secondly, regulatory reform may be low on Trumps priority list with topics such as Obamacare, immigration and, infrastructure investment being more immediate concerns. Finally, any efforts to ease regulation will take time and effort to pass through the House, Senate and overall approval process.
In closing, I think there will be some tweaks to Dodd Frank and the overall direction of global regulations but they will not be as drastic as Trump’s rhetoric indicates. Given we are entering the Trumpocolypse era, any positives will be greatly received.
In the words of Victor Hugo, “Even the darkest night will end and the sun will rise”.
We can only hope.
Feel free to leave comments and thoughts.