Kamala Harris Presidency: What It Means for U.S. Banking Policy
As Kamala Harris potentially steps into the role of President of the United States, her administration's approach to banking policy is expected to chart a course that, while distinct, shares some similarities with the current Biden administration, according to a note from the TD Cowen Washington Research Group dated Monday.
However, her background, political affiliations, and expected regulatory appointments may lead to nuanced shifts that could significantly impact the banking sector.
Key Banking Policy Expectations Under Harris
Completion of Basel 3 Endgame and Regulatory Continuity
Harris' administration is expected to finalize key regulatory initiatives such as the Basel 3 Endgame, a set of international banking regulations aimed at strengthening regulation, supervision, and risk management within the banking sector.
Regulatory Consistency
It is anticipated that Harris would maintain continuity with ongoing regulatory efforts, ensuring that the Basel 3 Endgame and the introduction of long-term debt and liquidity rules for banks, particularly regional ones, remain on track. This would provide stability and predictability in banking regulations.
Capital and Liquidity Requirements
Impact on Capital Levels
Even though Harris is seen as more pragmatic than Biden, it is anticipated that capital requirements for the largest banks could still increase by 3% to 5%. This is a more moderate increase compared to what might occur under a Biden administration but represents a significant continuation of efforts to fortify the financial system.
Long-Term Debt Requirements for Regional Banks
Harris's administration is expected to enforce long-term, unsecured debt requirements for regional banks, mandating that they hold between 5% and 5.5% of their risk-weighted assets in such debt. This aligns with efforts to ensure these institutions have sufficient buffers in case of financial instability.
Regulatory Appointments and Political Influence
Pragmatic Approach
Unlike Biden, who was significantly influenced by progressive voices, Harris is anticipated to adopt a more centrist stance. Her likely focus would be on appointing regulators who prioritize economic growth over aggressive reform. This could translate into a regulatory environment that is less stringent than under Biden but still cautious compared to a potential Trump administration.
Moderate Constituency
Harris’s potential victory would rely on the support of moderates, differentiating her from Biden, who had strong progressive backing. This could result in a more business-friendly banking policy, particularly concerning regulations that impact smaller and regional banks.
Bank Mergers and Acquisitions (M&A)
Improved Environment for M&A
Under Harris, the environment for bank mergers and acquisitions is likely to become more favorable. Since M&A might not be a primary focus for her administration, market forces could drive more deals forward, although this might be limited for the largest banks due to regulatory scrutiny and the potential for increased systemic risk.
Historical Context and Progressive Influence
California Attorney General Tenure
Harris’s aggressive stance against banks during her tenure as California Attorney General, especially in the wake of the financial crisis, has been noted. However, it is argued that this experience may not heavily influence her presidential policy, given the significant time lapse and different political context. This history, while important, is unlikely to define her approach to national banking policy.
Breaking It Down: What Does This Mean for You?
- Regulatory Stability: Expect continued regulation that ensures the banking sector remains robust and secure, minimizing risks that could impact your savings and investments.
- Capital Requirements: Large banks may need to hold more capital, which could make them more stable and less likely to fail, protecting your deposits.
- Business-Friendly Policies: Smaller and regional banks might experience less stringent regulations, potentially making it easier for them to offer loans and services, which could benefit local economies and small businesses.
- Mergers and Acquisitions: An increase in bank M&A could lead to more competitive offerings but also might reduce the number of community banks, impacting personal banking relationships.
- Historical Actions: While Harris's past actions against banks were aggressive, they are unlikely to heavily influence her presidency, leading to more measured and balanced banking policies moving forward.
In essence, a Harris administration could bring a balance between stability and pragmatism in banking regulations, impacting everything from the safety of your deposits to the availability of credit and the overall health of the financial system.