8 of the biggest issues facing the banking industry today

January 16, 2025 4:15 PM

Enjoy complimentary access to top ideas and insights — selected by our editors.

President-elect Donald Trump's return has bankers hopeful, as numerous political appointments and regulatory campaigns promise to shape the path of the industry in 2025. From predicting the future of the Consumer Financial Protection Bureau to record-breaking numbers of credit unions buying banks, these are some of the topics likely to shift under the new administration.

In a move that surprised regulators and banking leaders alike, the Federal Reserve's Vice Chairman for Supervision Michael Barr announced he would step down from the role on Feb. 28.

Barr, who has held the job since 2022, will retain his position on the Board of Governors but said in his letter to President Joe Biden that vacating the seat would avoid a distracting legal battle within the agency.

"The risk of a dispute over the position could be a distraction from our mission," Barr wrote. "In the current environment, I've determined that I would be more effective in serving the American people from my role as governor."

Fed Gov. Michelle Bowman, who was appointed to the board by Trump during his first term in November 2018, is seen by many as Barr's likely successor and expressed hope that the presidential change would open the door to more collaboration between banks and regulators.

Other top regulatory news includes CFPB Director Rohit Chopra's possible dismissal as the head of the agency.

Chopra alluded in prior congressional testimony in December that he wouldn't voluntarily step down from his leadership role but would leave if fired by Trump — following in line with Republican calls to overhaul the CFPB and unwind many of the rules put out in recent years.

Potential choices for Trump include Travis Hill, vice chairman of the Federal Deposit Insurance Corp., to lead the consumer agency under Trump. Jonathan McKernan, an FDIC board member, and Melissa Holyoak, an FTC commissioner, are all in the running for Chopra's title.

"It can be a challenge to find the right person for that role," Celia Winslow, executive vice president at the American Financial Services Association, told American Banker's Kate Berry. "It's a little challenging to get someone when you're telling them to stop what the agency is doing."

While some trends have been met with optimism from bankers, the 22 deals involving credit unions seeking to acquire banks last year have angered industry advocates again.

Below are expert insights into the top eight pressing issues facing bankers, and predictions for the shape of the industry in 2025.

Meet 4 new lawmakers likely to have an impact on banking

The 2024 elections reshaped the way members of Congress are thinking about banking and financial policies in the new year, with a number of new crypto-friendly voices joining key committees and reinvigoration for a deregulatory agenda.

A number of prominent banking voices in Congress departed after the 2024 elections. Rep. Patrick McHenry, R-N.C., formerly the chairman of the House Financial Services Committee, and Rep. Blaine Luetkemeyer, R-Mo., both retired from politics, and Sen. Sherrod Brown, D-Ohio, lost his reelection campaign.

The crypto industry also spent a huge amount in politics during 2024, eclipsing all other financial interests in the election, and helped put a number of people in Congress who are likely to support the industry's interests.

Read more:

Meet 4 new lawmakers likely to have an impact on banking

CFPB to regulate large participants in personal loan market

The Consumer Financial Protection Bureau said it will pursue a larger participant rule in the personal loan market, more than two years after a trade group and consumer advocates petitioned the bureau for one.

Although it's an infrequently used tool, trade groups, advocates and even individuals have the ability to petition federal agencies to pursue rulemakings. In September 2022, the Consumer Bankers Association and the Center for Responsible Lending asked the CFPB to start regulating larger fintech lenders that make installment and other kinds of personal loans.

"Although our views on consumer financial regulatory issues often diverge, CRL and CBA share a common belief that the absence of a rule defining larger participants in the market for personal loans has created an un-level playing field and a large risk to consumers that the Bureau can and should resolve through a larger participant rulemaking," the two groups said in a letter to the agency.

Read more:

CFPB to regulate large participants in personal loan market

Barr's self-demotion changes little for regulatory outlook

Michael Barr elected to end his term as the Federal Reserve's top regulator a year and a half ahead of schedule, taking the threat of a costly and potentially damaging legal fight with the incoming Trump administration off the table for himself and the central bank.

Barr said the self-demotion from vice chair for supervision to mere Fed governor was "painful" on a personal level but necessary to protect the institution. From a policy perspective, the move could have little impact on the Fed's regulatory outlook, at least in the near term.

Along with his presidentially appointed and Senate-confirmed position as vice chair, Barr also leads the Fed Board of Governors' internal committee on supervision and regulation. By retaining his seat on the board, Barr is eligible to continue chairing that committee, at least until a new vice chair for supervision is installed.

Read more:

Barr's self-demotion changes little for regulatory outlook

Recent CFPB rules face repeal with no return under Trump

The incoming Trump administration is expected to seek the repeal of some regulations finalized by the Consumer Financial Protection Bureau. On the chopping block are rules finalized by the CFPB since August, the six-month lookback deadline for lawmakers to repeal rules under the Congressional Review Act.

CFPB Director Rohit Chopra has bombarded the financial industry with a flurry of last-minute rules that have drawn the ire of banks and congressional Republicans. Agency rules that get overturned by Congress using the CRA come with a major catch — once the rule is repealed, the agency cannot issue another rule that is "substantially the same," an issue that could hamstring future directors.

In addition, the House of Representatives has less than 60 legislative days when the Senate's filibuster rules do not apply. Republicans will have one of the slimmest Republican majorities under Trump, testing whether the repeal of populist rules like the CFPB's $5 overdraft fees will be tough to push through.

Read more:

Recent CFPB rules face repeal with no return under Trump

Exclusive: Rep. Andy Barr to reintroduce de novo bank bill

Rep. Andy Barr, R-Ky., is reintroducing a bill that would make it easier for new banks to form.

Although Barr has introduced the bill several other times — first in 2021 — it has a much better chance of becoming law in the 119th Congress. That's because Republicans control both the House and the Senate, as well as the White House, and the bipartisan interest in community and rural banking in the wake of the Silicon Valley Bank crisis makes the proposal more appealing.

Last year, the bill advanced out of the House Financial Services Committee, where Barr served and continues to serve as chairman of the financial institutions subcommittee.

Read more:

Exclusive: Rep. Andy Barr to reintroduce de novo bank bill

Credit unions bought a record-breaking 22 banks in 2024

Twenty-two credit unions made deals to buy community banks in 2024, more than any other year.

The trend highlights the difficulties banks are having finding merger partners in their markets and credit unions' desire to diversify into business lending and expand their footprints. Critics say credit unions have an unfair advantage in the M&A market due to their tax-exempt status.

Credit union-bank mergers accounted for nearly one-fifth of deal activity in the banking industry this year, calculated by American Banker using S&P Global data.

Read more:

Credit unions bought a record-breaking 22 banks in 2024

JPMorgan becomes the last big U.S. bank to quit climate-banking group

JPMorgan Chase bid farewell to the Net-Zero Banking Alliance in January, making it the last big U.S. bank to leave the climate-banking group ahead of the second Trump administration.

JPMorgan's exit comes on the heels of similar departures by three of its peers — Bank of America, Citigroup and Morgan Stanley. In early December, Goldman Sachs became the first large U.S. bank to leave the alliance. Wells Fargo's exit was reported about two weeks later.

The exodus by the six largest U.S. banks reflects banks' changing priorities as President-elect Donald Trump prepares to take office in 13 days. Trump has said he wants to immediately boost U.S. oil and gas development and repeal legislation that provides funding for clean energy.

Read more:

JPMorgan becomes the last big U.S. bank to quit climate-banking group

CFPB rules, M&A standards most likely CRA repeal targets

A law allowing Congress to nullify executive agency regulations could play a role in the incoming Trump administration's push to undo the Biden-era financial regulatory initiatives, though litigation and new rulemaking will also play a significant role.

Jon Skladany, partner at Jenner & Block, says the current political conditions are optimal for the incoming Congress to utilize the Congressional Review Act, a 1996 law that allows Congress to overturn recently passed agency rules.

"Republicans control both chambers of Congress, which gives them the power to pass CRA resolutions on a partisan basis by a simple majority vote," he said. "A Republican in the White House means those CRA resolutions — which will target rules issued by the previous Democratic administration — are unlikely to be vetoed."

Read more:

CFPB rules, M&A standards most likely CRA repeal targets