Biden’s Banking Competition Push in Limbo With Trump Victory

A new rule requiring US banks to give customers free access to their data was part of a push by the Biden administration to promote competition in finance—one that now hangs in the balance as Donald Trump prepares to return to the White House.

While enthusiasm for some of the Biden administration’s initiatives targeting finance split across party lines, Trump’s victory was met with cheers on Wall Street, with bankers expecting a more hands-off approach.

“Reflexive deregulation in the name of promoting competition is likely to be the order of the day,” Dan Awrey, a Cornell Law School professor who studies financial regulation, said in an email.

The Consumer Financial Protection Bureau, which finalized the open banking rule last month, is “likely to come under fire,” he said, noting that Biden’s competition efforts in finance will hinge on personnel decisions at some of the key banking watchdogs.

Ahead of the election, agencies including the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency, and the Justice Department toughened their approaches to reviewing US bank mergers. The DOJ in September also sued Visa Inc. for allegedly maintaining a monopoly in the debit card market.

For its part, the CFPB issued the open banking rule partly as a way to prevent big incumbents from creating “moats around their power,” said Rohit Chopra, an ex-Federal Trade Commissioner who has led the CFPB since 2021.

“There are a number of anticompetitive practices that we see in banking and financial services,” Chopra told reporters Oct. 23 on the sidelines of DC Fintech Week. “Part of what we are trying to do is make sure that that mischief cannot occur.”

An industry trade group immediately sued to block the rule. But a transition in leadership raises larger questions about whether a Chopra-less CFPB would even put up a defense.

Bank Merger Focus

Finance was one plank of a competition agenda that gained significant momentum during Joe Biden’s presidency.

“Finance was necessarily on that list of priorities,” Jeremy Kress, a professor at the University of Michigan’s Ross School of Business who advised Biden’s DOJ on its bank merger policy, said in an interview before the election. “We know that consolidation in finance fuels consolidation across the economy.”

Capital One Financial Corp.’s proposed $35 billion acquisition of Discover Financial Services—which would create the largest credit card issuer based on outstanding loans and the sixth-largest bank in the US by assets—has been regarded as a litmus test for how some of the new bank merger policies will work in practice.

The Federal Reserve also plays a key role in approving the merger—a decision that will now likely happen after Trump steps into office and revamps agency leadership.

Trump on Wednesday said he would nominate as attorney general Matt Gaetz, the polarizing Republican House member who has backed the Biden antitrust agenda and would retain the ability to sue over the deal.

Wall Street has largely seen the Trump win as something that will lead to greater M&A activity across the board, including in banking.

More “growth-friendly” bank regulators, along with declining interest rates, “favor regional and super-regional bank merger activity,” Gregory Lyons, co-chair of the financial institutions group at Debevoise & Plimpton LLP, said.

Still, for all the changes introduced under Biden’s antitrust regime, Kress said “the banking agencies really have very little to show” from the last four years.

The three prudential banking regulators—the Fed, FDIC, and OCC—have yet to finalize the “Basel endgame” rules that would boost bank capital levels, and an effort to dial back the proposal has stalled amid disagreements among Biden’s regulators.

“There is a big open question about both personnel and policy in the banking agencies and that will have a major effect on competition policy and banking as well,” Kress said.

Open Banking Ecosystem

The CFPB’s rule comes as banks and a growing set of financial technology companies offer new digital payments and financial products.

The access to, and sharing of, consumer data in this ecosystem is what’s referred to as open finance. The CFPB gained authority to address the portability of that data in the 2010 Dodd-Frank Act, but it took more than a dozen years for a rule to come to fruition.

The regulations “took so long in coming that the industry just kept going,” Cornell’s Awrey said.

Mike Silver, who worked in the CFPB’s rule-writing office until early 2024, said all sides likely are in favor of some regulation, but that the sticking point is how far those guardrails should go.

The Bank Policy Institute claims in a lawsuit that the rule creates data privacy and security risks.

The question will be how responsive a new leader is to such concerns, said Silver, now a partner at Husch Blackwell LLP. One possible scenario could involve a new CFPB director agreeing with the banks to pause litigation while the agency reconsiders the rule, he noted.

Any debate would play out as the open banking system matures in ways that could give rise to the same concentration issues as the traditional banking sector, Awrey said.

Unlike other nations, the US has largely left the building of this “superhighway” to private actors, he said. “US policy makers are not putting the same sort of resources to this that most other G8 or G20 jurisdictions are.”