Banks in 2025: Three Key Issues Under Trump’s Watch

2025 is shaping up to be a year of significant change, and the banking industry is bracing for impact. With Donald Trump returning to the White House, the Federal Reserve signaling caution on rate cuts, and trade policies about to take center stage, banks face a year of opportunity and uncertainty.  As the economic and regulatory landscape evolves, the year ahead promises to test banks’ adaptability—both at home and globally. 

Here are three issues that could define the year for banks: 

Economic Uncertainty and Interest Rate Policy 

The Federal Reserve is keeping its foot on the brake when it comes to rate cuts, with only two reductions now expected in 2025. This conservative approach may slow consumer borrowing. On the other hand, banks could benefit from the steepening yield curve, boosting net interest margins and fixed-income trading. Larger banks, in particular, stand to gain through their investment banking arms, which could see increased activity if corporate bond issuance—already strong in 2024—remains robust. Last year’s tightening credit spreads signaled greater investor confidence in economic and business prospects, creating favorable conditions for debt issuance. However, the possibility of resurgent inflation or fiscal instability under the new administration could disrupt this delicate balance. Trump has indicated he will not attempt to replace Federal Reserve Chair Jerome Powell, but the incoming president’s broader economic policies could put pressure on the Fed to adjust its approach. 

Shifts in the Regulatory Landscape 

With deregulation back on the agenda under President Trump, banks are expected to see a lighter touch from federal regulators. This could spark a wave of mergers and acquisitions and even a revival of new bank startups—including states like Pennsylvania, where no new banks have opened since 2013. While the potential for growth is clear, particularly for community banks burdened by relatively steep compliance costs, so are the risks of over-leveraging or relaxing compliance standards in pursuit of profit.   

This shift in priorities is underscored by Michael Barr’s resignation as the Federal Reserve’s vice chair for supervision, effective February 28. His departure clears the way for Trump to appoint a successor, likely one more aligned with the administration’s agenda, signaling a potential acceleration in regulatory changes. 

Geopolitical and Trade Policy Challenges 

The Trump administration’s protectionist trade agenda, including proposed tariffs and currency realignments, could create ripple effects for banks. If these policies lead to a stronger dollar, domestic lending might get a boost, but international trade finance and cross-border operations could face additional strain. The administration’s approach to leveraging tariffs as a tool for economic diplomacy could lead to unpredictable shifts in global markets, leaving banks to adapt to a fast-changing environment. 

Bank risk managers are no strangers to navigating uncertainty, but 2025 may present an even bigger test. With a new presidential administration promising significant changes—some predictable, others not—the risks and opportunities for banks figure to be outsized. The risk function will play a key role as banks pivot quickly in response to emerging challenges—and seek to capitalize on new paths for growth.