Regulatory Relief for Community Banks?  Don’t Bet On It

In the financial services industry, conventional wisdom suggests that the new administration will bring broad regulatory relief. Many in our field assume that oversight will ease, compliance burdens will shrink, and community banks will finally get a break. 

But that’s a dangerous assumption, one that could leave community banks unprepared for what’s coming next.

Why Community Banks Shouldn’t Expect a Compliance Holiday

Despite expectations of deregulation, history tells us that any regulatory relief will likely be selective, complex, and slow-moving. Under previous administrations, regulatory rollback efforts focused more on large financial institutions, while compliance burdens for community banks remained largely intact. Even where deregulation did occur, new regulatory expectations such as increased focus on anti-money laundering (AML) and cybersecurity continued to emerge.

Key Regulatory Pressures That Aren’t Going Away

Community banks must remain vigilant as certain regulatory and risk management priorities will persist, regardless of who occupies the White House. 

1.  Risk Management Scrutiny Will Continue  

The Fed's latest Monetary Policy Report highlights ongoing vulnerabilities in the financial sector, particularly regarding commercial real estate exposure, hedge fund leverage, and liquidity risks. Regulatory agencies are unlikely to ignore these risks, meaning community banks should expect continued oversight in these areas.

2. Capital and Liquidity Standards Won’t Loosen Dramatically

 While some rollback of regulations has occurred, most community banks have already built their frameworks around heightened capital and liquidity requirements. Even under a deregulation agenda, examiners will continue to emphasize sound capital planning and liquidity risk management.

3. Fair Lending and Consumer Protection Will Stay in Focus

 Any move to reduce federal regulatory enforcement will be met with increased scrutiny at the state level. Many state regulators, particularly in Democrat-led states, have already signaled their intention to step in where federal agencies pull back. The Consumer Financial Protection Bureau (CFPB) remains active for now, and fair lending expectations will not disappear overnight.

4. Heightened Focus on Cybersecurity and Operational Resilience

The financial industry continues to experience a rise in cybersecurity threats and ransomware attacks. Regardless of political shifts, federal agencies will not reduce cybersecurity oversight. Community banks should expect continued examiner focus on incident response planning, vendor risk management, and cybersecurity frameworks.

The Cost of Waiting - Proactive Banks Will Win

Many community banks will take a "wait and see" approach, gambling that regulatory oversight will ease. That’s a tremendous mistake.  

The community banks that will thrive in this environment will be those that act now continuing to strengthen their compliance, risk management, and governance frameworks. Those that sit back risk scrambling to adjust when regulatory enforcement actions make clear that compliance expectations aren’t going away.

Are You Ready for the Next Chapter of Banking Compliance?

iKinetiq's team of experts works with community banks to cut through the noise and develop practical, strategic approaches to compliance and risk management. Don’t get caught off guard by assumptions of regulatory relief.  Let’s build a proactive strategy that ensures your bank remains compliant and resilient, and safe from regulatory enforcement actions and fines.

🚀 Schedule a consultation today to discuss how your bank can stay ahead of regulatory expectations.  Click here to schedule.