Banking on Regulatory Change in 2025

2025 is shaping up to be a pivotal year for regulatory transformation in banking. According to  “Ten Key Regulatory Challenges of 2025,” recently released by RMA corporate member KPMG, the combination of a new administration, leadership changes across regulatory agencies, and growing global regulatory divergence will create a complex and shifting landscape. 

While deregulatory trends at the federal level may ease compliance burdens in some areas, banks may see heightened expectations for risk management and governance, KPMG writes. This includes acting on prior regulatory findings and enhancing controls in critical areas such as cybersecurity, information protection, AI, and financial crime. However, KPMG expects investigations and enforcement actions tied to corporate compliance and individual accountability to decrease in 2025, creating a nuanced environment for banks to navigate. 

Companies, including banks, “will look to ‘roll through the shift’” but are advised to “remain vigilant to potential new, emerging, and downstream risks—even amidst an agenda to reduce regulatory burden,” Amy Matsuo, principal and national leader for regulatory insights at KPMG, said. Here are the challenges KPMG cited: 

• Regulatory Divergence: While deregulatory trends may ease compliance burdens at the federal level, increasing state-level activity and global regulatory divergence could intensify compliance challenges. 

• Trusted AI and Systems: Rapid advancements in AI integration raise issues of fairness, transparency, and accountability in an environment of complex and evolving standards regarding data privacy, risk management, and ethical deployment. 

• Cybersecurity and Information Protection: Intensifying cyber threats are driving regulators to focus on data governance, incident response, and operational resilience, with an emphasis on harmonizing standards, enhancing board oversight, and ensuring timely reporting. 

• Financial Crime: Modernizing AML/CFT programs remains a priority for regulators, with a focus on improved data quality, risk detection, and sanctions compliance to address emerging threats like beneficial ownership complexities and terrorist financing. 

• Fraud and Scams: Banks are facing heightened regulatory scrutiny to enhance defenses against identity theft, imposter scams, and AI-driven fraud. 

• Fairness and Protection:  KPMG anticipates regulators will closely examine fairness across the product lifecycle, including transparent marketing and effective complaint resolution, as companies navigate evolving consumer protection rules and expanded access. 

• Financial and Operational Resilience: Regulatory focus remains strong on resilience, particularly in capital and liquidity management, scenario testing, recovery planning, third-party dependencies, and governance practices aimed at safeguarding critical operations.  

• Third Parties and Providers: Risk-based oversight of third-party relationships is also surfacing as a priority, with emphasis on due diligence, monitoring, and contingency planning to address interdependencies and ensure operational continuity. 

• Governance and Controls: Regulators are expected to have heightened expectations for risk management frameworks in 2025, focusing on data governance, rigorous controls testing, addressing supervisory findings, and adapting to shifting risk profiles through effective change management. 

• Markets and Competition: Regulatory scrutiny of M&A activity and non-traditional competitors is set to persist, with the new administration potentially easing federal oversight in certain industries while state-level focus on transparency and consumer protection continues to shape market dynamics. 

As regulatory expectations shift, KPMG emphasizes that banks will need to adapt swiftly to emerging risks, including digital innovation oversight and geopolitical pressures. While the new regulatory agenda may suggest an intent to reduce regulatory burden, vigilance will help banks identify downstream risks and maintain compliance. For a deeper dive into these challenges and their implications, consult the full report.