By Arasu Kannagi Basil, Pete Schroeder and Lananh Nguyen
(Reuters) -U.S. bank stocks were unfazed on Friday after a report that President-elect Donald Trump’s team had floated the idea of shrinking or eliminating a top banking regulator, with analysts saying such a plan would not win the necessary political backing.
In recent interviews with bank regulator candidates, Trump advisers have asked whether the incoming president could abolish the Federal Deposit Insurance Corp (FDIC) and move its deposit insurance function into the Treasury Department, the Wall Street Journal reported on Thursday, citing people familiar with the matter.
Officials from the newly founded Department of Government Efficiency (DOGE), which has been tasked with finding major government savings, participated in the interviews, the WSJ said.
However, while the current system comprising three federal and multiple state bank regulators is complex, a major restructure would struggle to garner the political support needed to get through Congress, which is also expected to be tied up on tax reform and crypto legislation next year, analysts and academics said.
“It would require congressional action and despite the Republican party majority in both the Senate and the House, it would require support from the Democrats which remains very unlikely,” ING sector strategist Marine Leleux wrote in a note.
Bank stocks were little changed on Friday.
The Trump transition team has been interviewing candidates for financial agency roles, including the bank regulators, in recent days, said two people with direct knowledge of the matter. DOGE officials have been involved in some of those interviews, one said.
But at least one candidate for a top regulatory post was not asked about overhauling or streamlining the agencies, suggesting the idea is still in its early stages, said the second source.
Spokespeople for the transition team did not immediately provide comment, while an FDIC spokesperson declined to comment.
Trump has pledged to slash burdensome rules but has said little about bank regulation. Last year, the pro-Trump Heritage Foundation’s Project 2025 manifesto called for “more streamlined” bank supervision through the merger of the FDIC with other bank regulators. During his campaign, Trump disavowed the project but has since announced plans to appoint key contributors to prominent roles in government.
“Even if you could get it through Congress…it would be an exceedingly heavy lift and have lots of unintended consequences,” said Julie Hill, dean of the University of Wyoming College of Law, noting the FDIC had the experience and expertise necessary to oversee banks and safeguard the deposit insurance fund.
