Executive actions have accelerated regulatory consolidation and centralisation between federal US bank regulators, according to Fitch Ratings.
These informal alignments, driven by executive orders rather than legislative change, have the potential to reduce regulatory fragmentation and duplication and improve consistency, Fitch said, while supporting better risk management and transparency.
It cites harmonised merger-review processes and joint crisis management practices during recent bank failures as successful examples of this, stating that the practices have reduced regulatory fragmentation and increased predictability for banks operating across charters and states.
However, the ratings firm also warns that greater executive influence could reduce agency independence and potential reductions in headcount could introduce further risks.
Fitch expects this “de facto centralisation” to continue, predicting further coordination and standardised supervisory approaches to emerge.
“[Its] effectiveness” will depend on the durability and consistency of coordination mechanisms, which are important for banks managing fragmented but increasingly harmonised oversight. This evolving framework is an important factor in Fitch’s assessment of the US bank operating environment,” Fitch concluded.
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