2024 banking regulatory outlook

Responding to increased regulatory scrutiny

Federal banking regulators have signaled that supervisory scrutiny of financial institutions is expected to increase materially in 2024, with particular heightened attention on untimely remediation of supervisory findings. While larger banks are traditionally the targets of regulatory attention, scrutiny is expanding across the banking industry. Midsize regional banks should prepare for new regulation—including liquidity, debt, and capital requirements—as well as increased governance and risk management expectations. Furthermore, nonbanks—including fintech, payment companies, and big tech firms that are increasingly offering financial products and services—should prepare for an expanded regulatory perimeter. As supervisory scrutiny intensifies throughout the banking sector, institutions will likely need to devote more resources toward addressing legacy issues and building out their governance and risk management frameworks.

Safety and soundness at the forefront

A number of significant proposals designed to improve the safety and soundness of the banking sector are expected to be finalized in 2024. Among the most significant include the finalization of Basel III international standards, commonly called the “Endgame,” as well as new long-term debt requirements for large banking organizations. These regulatory changes will be among the most consequential for the industry in more than a decade, with many smaller banks expected to come under regulatory standards traditionally reserved for the largest, most systematically important institutions. Banks will need to devote significant effort to achieve compliance with these new regulations and understand the impact of these changes to their business model and ability to compete with non-regulated and foreign entities.

Intersection of innovation and consumer protection

Regulators are expected to emphasize consumer protection in 2024. In particular, regulators are likely to scrutinize the potential adverse effects that innovative products, services, and technologies deployed by banks may have on consumers. Aspects such as banks’ third-party risk management programs, fintech partnerships, and the deployment of emerging technologies like artificial intelligence (AI) and distributed ledger technology (DLT) are likely to come under increased regulatory scrutiny. Federal banking regulators are expected to finalize and modernize several consumer-related regulations in 2024, including fair lending practices and open banking. In response to these regulatory changes, banks of all sizes will need to conduct a thorough evaluation of their technological usage and partnerships and guard against consumer harm.

Get ahead of regulatory change

Proactive measures will be crucial to understanding the impact of banking regulatory changes in 2024. As regulatory priorities are defined and react to current external factors, banking leaders should analyze the impact of emerging trends, as well as proposed and final regulations on legal entity, business, and operational structures. The pace of potential change will stretch to board and senior management’s attention and prompt regulatory change processes to be strategic, not just process-driven. Strategic regulatory management is key.

If you are interested in learning more about the banking industry, check out our recently released 2024 banking and capital markets industry outlook here.