Davis Polk Financial Institutions practice head Margaret Tahyar was quoted in IFLR on banking regulation in 2024.

Discussing the Basel III endgame proposals announced in 2023, Margaret said, “[Federal Reserve] vice chair Michael Barr has been saying that he is seeking broad consensus among board members, but not unanimity. There’s some signaling that adjustments will be made, but what those might be is anybody’s guess.”

“On the regulatory reform front, 2024 is going to be even busier than 2023: we’re now about to enter a supercycle and a lot is going to happen,” she noted. “If you look back to 2023, items such as the Community Reinvestment Act and the FDIC’s special assessment rule were finalized. But there is a ton of proposed regulations and guidance out there still awaiting finalization.”

Margaret noted that the banking crisis in 2023 has influenced the content of proposals so far and will continue to have an impact on regulators’ choices. “Following the banking crisis in March, we’ve had a real tightening in bank supervision, and we will continue to see a much tighter and stricter supervisory environment going into next year,” she said. “We are dealing with the fallout from this year’s banking crisis and are expecting increases in enforcement orders.”

Discussing the expected update to bank merger guidelines, Margaret said, “There’s a vivid discussion going on among the banking agencies and the DOJ, but I’m not sure they’ve settled on a position yet. Presumably, when a proposal comes up it will have a relatively major effect, because there’s so much going on in terms of what ought to be happening in big mergers.”

“It’s probable that new goals are being set now – it’s just unclear what they are at this stage,” she continued. “A rethink of the logic around mergers at certain asset sizes seems imperative, particularly in light of some technological investments that are going to be needed.”

She added that it remains to be seen what the effects of a reform around banking M&A would be on normal mergers versus troubled ones in the back half of 2024 and front half of 2025.

Margaret also noted that the SEC’s climate disclosure rules, which may be finalized before the end of the year, will have meaningful consequences on the banking sector. “A lot of what the SEC does is having an impact on large banking organizations, even though it’s not banking regulation per se,” she explained. “The climate-related disclosures cover public companies at large, and many of the major banking institutions tend to be public. Equally, regional banks’ holding companies are typically public. So, the impact will be major.”

A crucial question is whether scope 3 requirements – which cover third-party emissions in the value chain – will be included in the final text. “Those will be very difficult to gather for banking organizations,” Margaret said.

“2024, US banking regulation ‘supercycle’,” IFLR (December 12, 2023)

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