Several key regulatory issues are likely to dominate the financial services agenda in the coming period. We are closely monitoring the following five areas:

The Future of the CFPB

Jonathan McKernan, President Trump’s nominee to lead the agency, is awaiting final Senate confirmation after advancing out of the Senate Banking Committee. In the interim, Russell Vought, the acting director until McKernan’s confirmation, is navigating the agency through several legal and administrative challenges to early actions intended to curtail the CFPB’s operations.

A suit brought by the CFPB employee union is likely to result in a preliminary injunction from a federal judge in D.C., ordering the agency to return to normal operations. This would include halting any actions preventing staff from performing statutorily mandated supervisory work. Adding to the agency’s challenges, a federal judge in Maryland previously ruled that recent mass firings were unlawful and ordered the Trump administration to reinstate probationary employees at 18 federal agencies, including the CFPB. In response, the CFPB has reinstated most probationary employees previously placed on administrative leave and has indicated staff should resume legally required work, although the direction from leadership has reportedly been inconsistent. The agency also recently issued notices in the Federal Register, suggesting that some operations have resumed.

It remains to be seen how McKernan, who has a track record as a regulator yet has also signaled his alignment with many of the administration’s priorities, will navigate the turmoil facing the agency. While legal challenges may prevent new leadership from dismantling the agency outright, McKernan is likely to advance efforts to weaken CFPB oversight through other means. These could include overturning its more stringent rules established by the Biden administration and dismissing ongoing cases.

Regulatory Reform

Regulatory reform is advancing rapidly to establish a regulatory framework for crypto assets. A major shift came on March 7, when the OCC’s Rodney Hood rescinded Biden-era guidance requiring banks to seek regulatory approval before engaging in crypto-related activities, suggesting a more accommodative stance toward digital assets by the national bank regulator.

In Congress, stablecoin bills are progressing in earnest. The Stablecoin GENIUS Act cleared the Senate Banking Committee with an 18-6 vote, signaling bipartisan support despite objections from Senator Elizabeth Warren. Robert Hines, executive director of the President's Council of Advisers on Digital Assets, indicated that the GENIUS Act and its House counterpart, the STABLE Act, could reach President Trump’s desk within two months. Looking ahead, market structure legislation is expected to be the next priority, with lawmakers aiming to finalize it before Congress adjourns for August recess.

Notwithstanding this progress, several open questions remain. Stablecoins are only one part of the digital asset landscape. Although the SEC’s Crypto Task Force is exploring whether and how existing securities laws apply to digital assets broadly, establishing a comprehensive regulatory framework across the crypto industry will be challenging, given these assets’ intentionally decentralized nature. Moreover, critics continue to emphasize the potential for fraudulent schemes through, for example, memecoins and question the industry’s capacity to combat illicit finance.

Basel III "Endgame"

With the proposed Basel III "Endgame" rules under review, Federal Reserve Chair Jerome Powell promised a capital-neutral starting point, a preference echoed by Acting FDIC Chair Travis Hill. Hill also emphasized the crucial role of the Federal Reserve’s upcoming stress-testing revisions, anticipated in December, noting that the interplay between these initiatives will determine the final impact on bank capital and risk management. Considering Trump’s nomination of Governor Michelle Bowman, a vocal critic of the Basel III Endgame, to serve as the Federal Reserve’s vice chair of supervision, the industry expects a revised proposal that mostly favors capital neutrality as well as changes to the enhanced supplementary leverage ratio, which would deliver capital relief to the nation’s largest banks.

Deposit Insurance Reform

Potential reforms to the deposit insurance system are anticipated. With legislative proposals from both Democratic and Republican lawmakers, combined with the FDIC's ongoing review and Acting FDIC Chair Travis Hill’s public prioritization of this issue, some form of reform is likely. This is a particularly important issue for mid-sized banks, who have been vocal about their concerns. Moreover, if the Trump administration’s proposal to curtail the FDIC’s supervisory authority goes through, the agency’s sole responsibility may be confined to the insurance fund.

Potential for Agency Consolidation

The administration’s drive to reduce government spending and bureaucratic overlap has put agency consolidation on the table. The existence of three federal banking agencies provides a clear target for demonstrating progress on this goal — although any major overhaul would require legislative approval. This drive for efficiency is underscored by the recent government-wide hiring freeze, which has led to cuts or rescinded job offers at the FDIC and the OCC. While the exact form of any consolidation remains unclear, discussions range from streamlining regulatory oversight to the more radical idea of transferring the FDIC’s supervisory work role to the OCC. The banking industry has begun to voice opinions on these proposals, with community banks opposing consolidation out of concern for the potential to politicize of a single federal regulator and larger banks generally favoring it due to the opportunity to streamline oversight of their operations.