Kamala Harris as Potential U.S. President: What Her Banking Policies Mean for Your Investments and Finances
As Kamala Harris potentially steps into the role of President of the United States, her administration's approach to banking policy is expected to follow a trajectory that, while distinct, shares some similarities with the current Biden administration, according to TD Cowen Washington Research Group. 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 complete key regulatory initiatives such as the Basel 3 Endgame, which are international banking regulations developed to strengthen regulation, supervision, and risk management within the banking sector. This regulatory continuity ensures stability and predictability in banking regulations.
Regulatory Consistency: Harris is expected to maintain continuity with ongoing regulatory efforts, which means not derailing the Basel 3 Endgame or the introduction of long-term debt and liquidity rules for banks, particularly regional ones.
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 moderate increase continues efforts to fortify the financial system without the stringent measures that might be seen under a Biden administration.
- 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 aims to ensure that 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 hinge on the support of moderates, differentiating her from Biden, who had strong progressive backing. This could result in a banking policy that is more business-friendly, especially 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, 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.
Analysis: How This Affects Your Life and Finances
To break it down simply, if Kamala Harris becomes President, you can expect some changes in banking policies, but not a complete overhaul. Here’s what it means for you:
- Stability in Banking Regulations: The completion of the Basel 3 Endgame and continuity in regulatory efforts mean that the rules governing banks will remain stable. This stability is good for the economy and your investments because it reduces uncertainty.
- Moderate Increase in Bank Capital Requirements: The largest banks might have to hold a bit more capital (3% to 5% more). This is a safety measure to ensure they can withstand financial shocks, indirectly making your deposits and investments safer.
- Support for Regional Banks: New long-term debt requirements for regional banks mean these institutions will be more resilient in times of financial instability. This is especially important if you bank with regional institutions.
- Centrist Regulatory Approach: Harris is expected to appoint regulators who balance economic growth with necessary oversight. This means fewer aggressive reforms but still enough caution to avoid financial crises.
- Favorable M&A Environment: An environment that supports mergers and acquisitions could lead to more strategic alliances in the banking sector, potentially offering you better banking services and products.
In summary, Harris' potential presidency could lead to a balanced, stable, and somewhat business-friendly banking environment, which, in turn, may provide a safer and more predictable landscape for your financial activities.