Banking with Biden: 3 changes for financial regulation

The US Election has been nothing short of dramatic as two opposing and increasingly polarised parties competed for the next four years of US presidency. On 7 November, it was announced that Joe Biden had been elected the 46^th President of the United States, though it remains to be seen whether President Trump will concede the victory.

In the run-up to Biden’s inauguration, CUBE took some time to consider 3 potential changes his presidency could mean for the future of financial regulation.

1. Regulation Best Interest (Reg BI)

It’s no secret that the Democrats want to see increased focus on a fiduciary rule across financial services; one that will ensure that financial advisors are held responsible for the advice they give and that they act in the interest of customers, rather than themselves. The current system, according to the Democrats, does not go far enough to protect investors. This was put plainly in the 2020 Democratic Party Platform:

“Democrats believe that when workers are saving for retirement, the financial advisors they consult should be legally obligated to put their client’s best interests first. We will take immediate action to reverse the Trump Administration’s regulations allowing financial advisors to prioritize their self-interest over their clients’ financial wellbeing.”

Those in financial services will be keen to see what changes, if any, are made if Biden opens up the floor to a renewed debate on Reg BI.

2. Environmental, Social and Governance factors

The Democratic Party has been vocal about its commitment to climate change and sustainability – underlining one of Biden’s first moves as re-joining the Paris climate accord. For the financial industry, this could mean a shift towards environmental, social and governance factors becoming mainstream.

Much of Europe and the UK has made strides towards ESG factors and measures to tackle the climate crisis. Meanwhile, the US under a Trump administration has fallen behind. While many of the key European regulators have scrambled to create ESG frameworks and new reporting rules, the US regulators appear reluctant – in some cases outright refusing to do so. This may change under Biden, especially if he looks to appoint a more left-leaning Chair of the Securities and Exchange Commission when Jay Clayton’s term expires in 2021.

3. Regulation

When Donald Trump entered office in 2017, he looked to reset financial regulation. The Republican party has since introduced a wave of deregulation measures, from less stringent disclosure requirements to more relaxed conflict of interest rules.

It is likely that Biden may look to overturn some of these more relaxed measures and implement more stringent, Obama-era regulations. As he wrote in July, the Democrats will “strengthen and enforce the Obama-Biden Administration’s Dodd-Frank financial reform law to protect American workers from the impacts of the future financial crises.”

Watch our fireside chat with Mitch Avnet

Many might have hoped that the US election would have provided a degree of clarity, however – at present – the future remains uncertain.

Over the course of this engaging, insightful fireside chat, CUBE’s Head of Sales, Rob Fulcher, and Compliance Risks Concepts CEO, Mitch Avnet look back over the past four years under a Trump administration to examine what influence it has had on financial services before turning their attention to what a Biden administration might look like:

• Where will Biden’s focus lie – Climate change? Consumer protections? More regulation?
• Will he pick up Obama-era regulations that were abandoned under President Trump?
• Will we see a review of Reg BI?
• How important is the appointment of a new SEC Chairperson following Jay Clayton’s departure?
• What does a Biden win mean for RegTech and compliance services in general?

Watch on catch up