Navigating a New Regulatory Landscape: What US Banking Deregulation Means for Risk Management

The US banking sector is on the brink of significant change as it prepares for a new regulatory landscape that could reshape risk management across financial institutions and markets. The anticipated shift is most notably marked by the Federal Deposit Insurance Corporation (FDIC) and other federal regulators easing key leverage rules set to take effect in November 2025. This new phase of financial deregulation raises questions about how institutions will adapt and what this means for governance, risk, and compliance (GRC) teams.

The Shift in Leverage Rules

The newly proposed reforms will specifically lower the enhanced supplementary leverage ratio (eSLR) for the largest banks while lightening capital obligations for smaller institutions. The FDIC estimates that subsidiaries at major banks could see a reduction of about 27% in capital requirements, equating to around $213 billion in total, while eSLR at the holding company level is projected to drop by approximately $13 billion—a decrease of less than 2%.

This deregulation wave is primarily driven by advocates who argue that post-2008 capital regimes have constrained lending and stifled economic growth. However, while these changes are framed as supportive of growth, they pose significant implications for the risk posture of the US banking system. The capital buffers instituted after the financial crisis were essential in enhancing resilience; reducing them changes the dynamics through which banks and regulators manage systemic risk.

Implications for Governance, Risk, and Compliance Teams

For GRC teams, this impending deregulation does not equate to a reduction in responsibility. Instead, the introduction of lighter regulatory constraints heightens the necessity for stronger internal controls. With reduced mandatory capital buffers, financial institutions must ensure that their internal risk controls, stress-testing frameworks, and capital-planning processes are not only robust but also exceed previous levels of rigor.

GRC teams will need to revisit their assumptions regarding liquidity, credit exposures, and operational vulnerabilities. Scenario analysis must evolve to include the likelihood that institutions may face stress with diminished loss-absorbing capacity. Boards will demand clearer reporting on how the institution’s risk profile evolves under the new rules, requiring GRC functions to provide more precise and forward-looking risk insights.

Moreover, as banks adjust their balance-sheet strategies or explore new business lines amid looser regulations, there are downstream effects that will impact fintech partners, broker-dealer affiliates, and payment processors. GRC teams across this financial ecosystem will need to revise their vendor-risk frameworks, placing a greater emphasis on resilience, contractual protections, and contingency planning.

The Ripple Effect on Market Oversight

While the Securities and Exchange Commission (SEC) does not directly supervise bank capital requirements, it plays a critical role in market oversight. The decreased capital buffers within banks could lead to increased volatility across various funding markets, including securities financing, lending, and market-making activities—all of which interact with SEC-regulated entities.

The SEC is expected to increase scrutiny regarding how publicly listed banks and broker-dealers disclose risks related to capital adequacy, liquidity, and counterparty exposures. Firms may find themselves subjected to more in-depth investigations of their internal controls, governance processes, and the accuracy of their regulatory filings. In a landscape of lighter prudential rules, transparency will become one of the SEC’s primary tools for safeguarding market integrity.

Furthermore, the SEC may pay closer attention to systemic-risk channels linked to repurchase (repo) markets, treasury trading, and securities lending. These areas are heavily influenced by banks’ balance-sheet capacity, prompting regulators to monitor how reduced capital impacts trading behavior and funding stability.

Forward-Thinking Approaches in the New Regulatory Environment

As this new phase of deregulation unfolds, it is critical to recognize that lighter capital rules do not negate the need for effective risk management; rather, they elevate expectations. Institutions will be required to demonstrate more resilient governance, sharper risk reporting, and enhanced operational discipline to compensate for fewer prescriptive requirements.

For GRC teams, the upcoming period will not be characterized by a reduction in regulations, but rather by increasing expectations. The SEC’s focus on disclosure quality and market oversight will be amplified as banking risks seamlessly integrate into capital markets.

By proactively addressing these challenges, GRC professionals can better navigate this evolving landscape, ensuring that their organizations not only comply with the new regulatory framework but also position themselves for sustainable growth in a more complex financial environment.