A recent Fitch Ratings report warns of long-term risks tied to US bank deregulation which may offset short-term benefits, as reported by Investment Executive.
The rating agency highlights that while recent regulatory rollbacks appear "neutral from a credit rating perspective" for now, the "risks these efforts entail increase over time." The report identifies key concerns such as easing capital requirements and diminishing regulatory independence. Efforts to weaken Basel III reforms may be damaging, as "an erosion of capital buffers in conjunction with higher risk appetite" could harm ratings.
Fitch also cautions against political interference in regulatory bodies, stating that "increased political influence in regulatory decision-making may erode public trust" and hinder long-term planning. Reforms that reduce consumer protections and encourage crypto involvement present further concerns. For instance, relaxed oversight may increase "reputational risk" and banks' exposure to “operational risk.”
The agency also warns that reduced enforcement of anti-bribery laws could raise the risk of facilitating corruption. Fitch concludes that a lax stance on crypto raises risks to bank credit profiles, emphasizing that without stronger oversight, it may negatively reassess bank business models.
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