What could Kamala Harris as president mean for banking policy? Via Investing.com

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, has some similarities to the current Biden administration, TD Cowen Washington Research Group said in -a note. dated Monday.

However, her background, political affiliations and anticipated regulatory appointments may lead to nuanced changes that could have a significant impact on the banking sector.

Key expectations of banking policy under Harris

Completion of Basel 3 Endgame and Regulatory Continuity: Harris’ administration is expected to finalize key regulatory initiatives such as Basel 3 Endgame, which involves a set of international banking regulations developed to strengthen regulation, supervision and risk management in the banking sector.

Consistency of regulations: 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.

The completion of these initiatives would likely continue under her administration, ensuring 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 rise by 3% to 5%.

That would represent a more moderate increase compared to what could happen under a Biden administration, but would be a significant continuation of efforts to strengthen the financial system.

Long-term debt requirements for regional banks: The Harris administration is expected to implement long-term unsecured debt requirements for regional banks, requiring them to hold between 5 percent and 5.5 percent of their risk-weighted assets in such debt.

This is consistent with efforts to ensure that these institutions have sufficient buffers in the event of financial instability.

Regulatory appointments and political influence:

Pragmatic approach: Unlike Biden, who has been significantly influenced by progressive voices, Harris is expected to take a more centrist position. Her focus would likely be on appointing regulators who prioritize economic growth over aggressive reforms.

That 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’ potential victory would hinge on the support of moderates, setting her apart from Biden, who had strong progressive support.

This could lead to banking policy that is more business-friendly, particularly in terms of regulations affecting smaller and regional banks.

Banking mergers and acquisitions (M&A):

Enhanced M&A environment: Under Harris, the environment for bank mergers and acquisitions is likely to become more favorable. As M&A may not be a primary focus for her administration, market forces could drive more deals, although this may be limited for the largest banks due to regulatory scrutiny and the potential for increased systemic risk .

Historical background and progressive influence: California Attorney General’s tenure: Harris’ aggressive stance against banks during his tenure as California attorney general, particularly in the wake of the financial crisis, was noted.

However, it is argued that this experience may not strongly influence her presidential politics given the significant time span and different political context. This history, while important, is unlikely to define her approach to national banking policy.