2023: The Year the Biden Administration Tackles Financial Services Regulation

2023: The Year the Biden Administration Tackles Financial Services Regulation

By: Thomas Dee, Capstone US Financial & Business Services Managing Director

2023 will be a landmark year for US financial services regulation, as the Biden Administration looks to lock in high-profile regulatory changes before it faces the uncertainties of the next presidential election. In the next 12 months, we expect significant rulemakings spanning consumer finance, capital markets, banking, fintech, wealth management, insurance, and other subsectors. Here, we preview several of the policy changes we foresee (and we provide links to more detailed 2023 previews to various subsectors).

Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra has a full agenda. In early 2023, we expect the CFPB to propose a rule reducing credit card late fees, which if finalized will present headwinds for card issuers. Another closely-watched rulemaking will be the bureau’s Personal Financial Data Rights rulemaking, which is expected to be proposed in late 2023 and would move the US towards “open banking” – overhauling the regulatory framework for fintechs and data aggregators. The bureau is considering rulemaking in other areas, which include overdraft/insufficient funds fees and credit reporting, setting the stage for a busy year. The bureau’s rulemakings progress at the same time the agency has continued to grow the number of firms facing CFPB litigation or investigations, including Credit Acceptance Corporation (CACC), Equifax, Inc. (EFX), TransUnion (TRU) and many more.

We believe the SEC will also finalize its climate risk disclosure rules – which, if adopted, would create opportunities for climate risk compliance and reporting firms – in early 2023.

The Securities and Exchange Commission (SEC) will proceed with several high-profile rulemakings this year. Most controversial are the SEC’s four equity market structure rulemakings, which the agency proposed on December 14th, and if finalized would create headwinds for market makers and some retail broker-dealers, and opportunities for the exchanges. The rules could be finalized as early as 2H 2023, though we believe 2024 is more likely. We believe the SEC will also finalize its climate risk disclosure rules – which, if adopted, would create opportunities for climate risk compliance and reporting firms – in early 2023.

The Fed is expected to unveil plans for higher bank capital requirements early this year, which will likely be followed by rulemaking. We expect the revisions to touch on risk-weightings, the countercyclical capital buffer, the leverage ratio, and other areas – and on balance, will increase capital requirements for large institutions. We also expect further scrutiny of bank-fintech partnerships, which will come from the Federal Deposit Insurance Corporation (FDIC), state legislatures, and state attorneys general.

Overall, we believe 2023 will bring with it significant policy changes for the US financial services sector, with many transformative rules likely to be proposed or finalized this year.

In the wealth management space, the US Department of Labor (DOL) intends to propose its latest so-called “fiduciary” rule in early 2023, which would strengthen the standard of care for pockets of the wealth management industry – relitigating an issue that has seesawed under the two previous administrations. And the Federal Trade Commission (FTC) recently proposed a rule that would broadly prohibit non-compete agreements, which if finalized could pose challenges for a host of industries, including wealth management and professional services. The rule could be finalized in late 2023 or into mid-2024. Overall, we believe 2023 will bring with it significant policy changes for the US financial services sector, with many transformative rules likely to be proposed or finalized this year. For more detail, see our recent 2023 previews on US financial services overall, consumer finance and insurance, or reach out any time.

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