By Monica C. Meinert
After four years of being rocked by the “regulatory tsunami,” the tide may be about to turn for the banking industry.
President Trump won a decisive victory in the 2024 presidential election and Republicans succeeded in winning narrow margins in both the House and Senate. With the shifting power dynamics at both ends of Pennsylvania Avenue, combined with the anticipated leadership changes at several key bank regulatory agencies, bankers are seeing an opportunity to reset the conversation around banking regulation in Washington.
“We’re going to have stakeholders with a lot more alignment both in Congress and at the agencies,” notes ABA President and CEO Rob Nichols. But he cautions that changes to the regulatory rulebook will take time and persistent advocacy by bankers to bring about. “There are several pieces of the regulatory apparatus that we view as unnecessary, unneeded or unfair, and there are different ways to change them. Some changes we’ll continue to pursue in the courts. Some will be changed via re-proposal. There will also be some legislative tools that come into play.”
During a recent meeting of ABA’s Government Relations Council, Nichols emphasized that “from a legislative standpoint, we have a year-and-a-half window to sprint. Then we get into a midterm election, and we can expect legislative activities to slow down.”
With the help of banker advocates, ABA and the state associations are already hard at work to advance the industry’s priorities, which are outlined in ABA’s 2025 Blueprint for Growth.
A big part of that effort involves educating new lawmakers and their staff, notes ABA EVP Kirsten Sutton. “We want all staffers to be conversant on banking issues.” Sutton also emphasizes that while Republicans won narrow majorities in both chambers, “we cannot ignore the minority,” and that working on a bipartisan basis will be essential to move important banking legislation forward.
Tax reform top-of-mind
One of the biggest items on the agenda for the 119th Congress will be tax reform.
The last comprehensive tax reform package was passed in 2017 under the first Trump administration, and with many provisions of the Tax Cuts and Jobs Act scheduled to sunset at the end of 2025, lawmakers must now consider extending those provisions, including individual income tax cuts. With an extension package expected to come with an estimated $4.4 trillion price tag, questions of how to pay for it will be part of the debate on Capitol Hill.
“We’re hearing from legislators that everything is on the table,” says ABA VP Joey Connor. That could include possible changes to the corporate tax rate — which was permanently set at 21% by the TCJA.
Connor adds that ABA is already working proactively to push back against any potential bank-specific tax that might emerge as a potential pay-for. “We’re going into offices right now — including members of the House Ways and Means and the Senate Finance Committee — and talking about why a bank tax is not the right answer.”
In fact, he says, a recent PwC study warns of the real-world consequences of implementing such a tax: the study found that a 10 percent decline in bank assets is associated with an approximate 0.7 percent decline in GDP growth. In addition, institutions subject to a bank tax also tend to reduce lending by between 2.8% and 6%, which could restrict credit access for consumers.
Another tax-related development that many bankers will be watching closely is whether Congress grants an extension for the Section 199A pass-through deduction. Many banks in the U.S. operate as S-corporations, or “pass-through” businesses, and the 199A deduction allows owners of these S-corporations to deduct up to 20% of their taxable income — which in turn supports these institutions in their mission to serve their communities.
As the tax reform conversation continues in Washington, Connor says banker advocacy can help move the needle. “Stories about jobs created, investment in districts, investments in states after TCJA, what you did with the corporate rate after it was dropped — those are the kind of things that staffers and members of Congress want to hear.”
The holdovers
While the tax conversation is likely to dominate the legislative agenda, there are several bills introduced in previous Congresses that could come up again in 2025, including the ABA-backed Access to Credit for our Rural Economy, or ACRE, Act.
ACRE would create a tax exemption for interest income that banks earn on ag loans secured by ag real estate or rural mortgage loans in communities with less than 2,500 residents and has been a longstanding priority for bankers. “It gives us an equal footing, an opportunity to stand equal with other lenders,” including Farm Credit, notes ABA Government Relations Council Chairman Ken Clayton, who is president and CEO of Western Bank in Artesia, New Mexico. “And not just on the farm side — on the housing side in rural communities [where] it’s tough to get a mortgage.”
While ACRE received tremendous support in the previous Congress, Sutton points out that two of the bill’s key sponsors — Wiley Nickel in the House and Jon Tester in the Senate — lost their congressional seats in the 2024 election, which means that bringing new lawmakers up to speed on the bill and how it will benefit consumers in rural America will be essential in the year ahead.
In addition to ACRE, ABA will also continue advocating for bills including the SAFER Act — which would enable banks to serve legitimate cannabis businesses in states that have voted to legalize, as well as legislation that would strengthen minority depository institutions and community development financial institutions across the country.
Bankers must also be prepared to play defense on harmful legislation that could be resurrected in the 119th Congress, including the so-called “Credit Card Competition Act” championed by Sens. Richard Durbin (D-Ill.) and Roger Marshall (R-Kan.) that would apply Durbin Amendmentlike price controls to credit cards.
“We’re hearing that Sen. Marshall wants to offer CCCA as an amendment on anything that’s moving,” Sutton says, adding that continuing to beat back this misguided bill will mean going up against a very vocal retail lobby. “There are a lot more retailers in every congressional district than there are banks and credit unions. We’re not out of the woods yet — and preventing this bill will continue to be a top priority for ABA.”
Regulatory rewind
On the regulatory side, changes began on day one of the Trump administration, with the heads of several agencies changing over, but the pace of change moving forward will vary, says ABA EVP Jess Sharp. “It’s going to be uneven from agency to agency, issue to issue from a timing standpoint. But there are lots of reasons to be enthusiastic.”
ABA EVP Ginny O’Neill notes that guidance — including the many blogs, advisories and policy statements issued by the CFPB — can (and likely will) be unwound at the stroke of a pen.
A few regulatory actions will also be up for review by Congress under the Congressional Review Act — a lesser-known legislative tool that provides a mechanism for Congress to invalidate rules issued by federal agencies within a specific time period.
“The best estimates are that the CRA lookback probably extends to July 15,” O’Neill says. Given that timeframe, she adds that the CFPB’s 1033 final rule and overdraft final rule could face congressional scrutiny.
ABA is also working on multiple fronts to address other problematic Biden-era rules. Currently, ABA is engaged in several active lawsuits, including those challenging the CFPB’s UDAAP exam manual update, as well as the Section 1071, late fee, and overdraft final rules; the Federal Reserve’s changes to Regulation II; and a joint agency rulemaking on the Community Reinvestment Act.
While litigation moves forward, ABA is continuing its outreach to the regulatory agencies to elevate the many challenges these misguided rules will impose upon banks and their customers. The association is also exploring targeted legislative changes to rules like the 1071 final rule that would widen the exemption for smaller-volume lenders.
In summation, when it comes to bringing about regulatory change, O’Neill says, “there are lots of different tools, and we have to use them all.”
Fraud on the front burner
As the industry works to unwind the misguided rules of the past several years, bankers are also keeping an eye on a major threat dominating the discussion today: fraud.
At the 2024 ABA Annual Convention in New York, the association unveiled its advocacy priorities related to fraud, including a call for Congress and the new administration to increase coordination around combatting this type of financial crime, establishing a database that will help banks and other businesses track and report spam text messages, and providing funding for “financial crimes intelligence centers” that can help make more efficient use of resources at the state and local level.
“We need a national strategy to prevent scams and fraud. Prevent is the keyword,” says ABA EVP Paul Benda. “There needs to be a cross-agency effort to solve this issue, and we need other industries to join us in this fight.”
Seizing the moment
For GRC Chair Clayton, 2025 will be a year of rolling up sleeves and getting to work to bring about meaningful change — and he encourages all bankers to get involved in advocacy by building relationships with lawmakers in their districts, and by attending the 2025 ABA Washington Summit, April 7-9.
As the CEO of a small community bank with 22 employees, Clayton’s message is this: “Don’t sit in a small town and your small bank and think you can’t come to Washington, or that you can’t sit at the table with somebody from [a larger bank] and kick ideas around. You can be as involved as you want to be, and you can make a difference.”
ABA BLUEPRINT FOR GROWTH
The American Bankers Association is the only trade association to represent banks of all sizes and their 2 million dedicated employees. We help America’s banks serve their customers and strengthen their communities by advocating for policies in Washington that drive a healthy economy for all, pursue rational regulation to preserve Main Street access to credit and capital, and foster a competitive financial services market.
We are the only trade association with a formal alliance of 52 state bankers associations that work tirelessly to ensure banks can continue to meet the needs of their customers in their home states. ABA and its state association partners believe a strong banking industry is foundational to a strong economy. We look forward to partnering with members of Congress and regulators to ensure we are delivering on both.
Drive healthy economy for all.
Banks of all sizes and business models play important roles in driving healthy growth across all corners of the economy. Our diverse banking ecosystem is comprised of more than 2 million dedicated employees partnering with policymakers to grow our economy and inject needed capital into rural and underserved communities so everyone can succeed. We call on Congress to take the following actions:
Tax policy. Pursue pro-growth tax policy that encourages investment and expands opportunity for all Americans by ensuring a competitive corporate tax rate and continuing the Section 199A pass-through deduction, a provision that enables many community banks to play a vital role in local economic development.
ACRE. Enact the Access to Credit for our Rural Economy Act, which will sustain and grow rural America by lowering the cost of credit for farmers and ranchers financing agricultural real estate as well as the cost of homeownership in 17,000 rural communities.
Mission-driven banks. Support the work of minority depository institutions and community development financial institutions — banks that are uniquely focused on serving communities of color and low-to-moderate income communities — by creating a CDFI investment tax credit that would incentivize long-term capital investment in these vital institutions.
Housing. Approach housing policy holistically by supporting initiatives that create equitable, affordable and sustainable housing opportunities across all communities while ensuring liquidity to primary and secondary markets, including through government-sponsored enterprises (GSEs) and the Federal Home Loan Banks.
Fraud. Pursue an “all of government” approach to combating financial fraud to protect consumers and reduce the number of Americans who fall victim to scams.
Pursue rational regulation to preserve Main Street access to credit and capital.
Bank regulations have significant real-world consequences that stretch far beyond the regulated entities themselves – affecting the stability of the financial system, growth in underserved communities, and the cost and availability of financial products and services for consumers and businesses. Over the past several years, bank regulators have proposed and finalized regulations that will reduce access to affordable credit and undermine the dynamism and diversity of our banking system. We urge Congress and regulators to mitigate the effects of such proposals:
Small business lending data collection (Section 1071). Work to repeal Section 1071 while calling on the CFPB to pause implementation and begin a process to formally withdraw the rule as we pursue ongoing litigation. Interchange (Durbin Amendment). Oppose government mandates on credit card routing and urge the Federal Reserve to put low-to-moderate-income consumers before the needs of large retailers by withdrawing its proposal to impose misguided debit card price controls that will raise the cost of basic checking accounts.
Community Reinvestment Act. While continuing our litigation, advocate against agency overreach and for a modernized CRA rule that encourages bank lending to lowand moderate-income individuals and communities.
Bank capital. Before even considering any proposals to raise already high bank capital levels, provide a “quantitative impact study” (QIS) and other data analysis that show the true cost to the economy of proposed higher capital standards including the impact on credit availability for lowand moderate-income borrowers, farmers and ranchers and other stakeholders.
SAFER Banking. Pass the SAFER Banking Act to get state-sanctioned cannabis cash off the street and into regulated financial institutions, making our communities safer and the cannabis industry more transparent to regulators, tax authorities and law enforcement.
Open banking (Section 1033). Delay implementation and finalize a CFPB rule to supervise data aggregators before significantly overhauling the 1033 rule to address scope, liability, and cost.
Credit card programs. Delay implementation and withdraw the CFPB’s rule on credit card late fees to preserve access to credit for low-and moderate-income borrowers as litigation remains active.
Foster a competitive financial services market.
Government oversight of the financial services sector is critical to maintaining a safe and sound banking system, but regulations must be applied evenly across all financial services providers to protect consumers, businesses and the stability of the financial system. Applying like-kind regulation to like-kind activity and avoiding unnecessary distortions within the financial services marketplace — whether through price controls, unevenly applied regulations or subsidies — will ensure a level playing field and minimize migration of financial products to less regulated entities. Policymakers should:
Deposit insurance reform. At a minimum, lawmakers should give the FDIC the authority and flexibility it needs to enable a timely response to crises, ensuring fair treatment across banks of all sizes and reducing reliance on the systemic risk exemption.
Credit unions. Scrutinize whether credit unions are meeting their statutory objective of serving LMI communities in a robust, demonstrable way that justifies their preferential tax treatment over community banks and evenly apply regulatory requirements, including the Community Reinvestment Act, to banks and credit unions.
Digital asset regulation. Bring stablecoins inside the banking regulatory perimeter, and require equivalent capital, liquidity and consumer protection standards across all stablecoin providers, ensuring banks are not disincentivized relative to nonbank providers and have the regulatory clarity they need to custody digital assets.
National bank preemption. Defend the dual banking system, a pillar of economic strength that spurs innovation and empowers banks to serve every market in the United States, from states’ efforts to assert authority over basic operations of national banks, including decisions about deposit taking, lending and risk management.
Read more at aba.com/blueprint.
