As Donald Trump embarks on his 2024 presidential campaign, he has expressed intentions to reshape regulatory bodies, a move that has raised alarms among European financial authorities. During his first term from 2017 to 2021, Trump successfully eased regulations on banks by revising the Dodd-Frank Act, a strategy that many believe could be revisited if he returns to office [174a32ab].
Goldman Sachs CEO David Solomon has voiced support for Trump's deregulation efforts, describing them as 'constructive for growth.' He noted that the regulatory environment had pressured CEOs to limit investments over the past few years, and he anticipates a business-friendly approach under the incoming administration that could stimulate economic growth [98e40dda]. Invesco also predicts an 'environment of hyper-deregulation' that could spur investment, although Solomon cautioned that this 'cocktail of change' might have both positive and negative impacts on growth [98e40dda].
European officials are particularly wary of a potential 'race to the bottom' in regulatory standards, fearing that US banking instability could have international repercussions. Dominique Laboureix, chairman of the Single Resolution Board, has highlighted the risks associated with a deregulated US banking environment, emphasizing that instability in the US could reverberate across global markets [174a32ab].
Currently, US banks are advocating for the repeal of certain predatory lending rules and the Basel III Endgame regulations, which were finalized in 2017 with the aim of strengthening banking resilience. In contrast, the EU plans to implement new banking rules starting January 2025, while the US is targeting a timeline of 2025 to 2028 for its regulatory changes [174a32ab].
Goldman Sachs economists, led by Jan Hatzius, project U.S. economic growth at 2.5% in 2025, factoring in tax cuts, regulatory easing, and potential tariffs. However, their model does not account for a 10% tariff on all imports or a deportation program, which could suppress growth [98e40dda].
European banks argue that the increased capital requirements imposed by Basel III could harm their competitiveness in a global market, especially if US banks are allowed to operate under looser regulations. Trump’s previous deregulation efforts attracted significant capital to US banks, leading European financial institutions to express concerns about a widening competitiveness gap, which they attribute more to economic disparities than to regulatory frameworks [174a32ab].
In light of these developments, European financial stability bodies are emphasizing the importance of maintaining solid regulatory rules to safeguard against potential crises. Carlo Lombardini has critiqued the excessive focus on Trump in the deregulation debate, suggesting that a balanced perspective is necessary to understand the broader implications of financial regulation on both sides of the Atlantic [174a32ab].
Simultaneously, Trump's administration has signaled a renewed focus on deregulation that extends beyond banking. The Department of Government Efficiency (DOGE) was announced, led by notable figures such as Elon Musk and Vivek Ramaswamy, with the goal of restructuring federal agencies and eliminating unnecessary regulations by mid-2026 [959ed6f5]. This initiative is expected to have mixed effects on startups; while some experts foresee opportunities for innovation and growth, others express concerns about potential negative impacts on business operations and environmental efforts [959ed6f5].
Sean Kane noted a surge in small business optimism post-election, while Ali Kazmi highlighted the potential for innovation in sectors like MedTech and AI. Richard Robinson anticipates a merger and acquisition boom in 2025, and Oliver Gassmann emphasized that deregulation could lead to new entrepreneurial activities [959ed6f5]. As these dynamics unfold, both European markets and US startups will need to navigate the complexities of a rapidly changing regulatory landscape.