Fed: Regulatory changes to remain a dominant theme for 2018 – TDS

Analysts at TDS suggest that bank deregulation will remain a dominant theme in 2018 as the rollback of the rules laid out in the June 2017 Treasury report gets underway.

Key Quotes

“We believe that an easing of the Supplementary Leverage Ratio (SLR) and Liquidity Coverage Ratio (LCR) rules will have the largest impact on bank balance sheets. Note that the rollback does not require Congress to act, but requires the cooperation of the Fed, the Office of the Comptroller of the Currency (OCC) and Federal Deposit Insurance Corporation (FDIC). President Trump has nominated Jay Powell for Fed Chair and appointed Randy Quarles as Vice Chair for Supervision, both of whom should be supportive of regulatory easing. The President has also nominated Joseph Otting to head the OCC. FDIC President Gruenberg’s term runs out in November, and the President is likely to nominate a pro-deregulation candidate.” 

“As these pieces fall into place, we look for the Fed, OCC and FDIC to begin issuing notices of proposed rulemaking in H1 2018, potentially allowing them to put final rules in place as soon as H2 2018. We look for markets to react to each incremental announcement of regulatory rollback, with 30yr swap spreads already widening following the Treasury report and again following the nomination of Powell for Fed Chair.”