A View From The Exchange: Will 2025 be the year of deregulation? 

President Trump has signalled a wave of deregulation from the US that may supercharge the global tide of deregulation expected for 2025. The UK government is under pressure to achieve economic growth and will not want domestic firms to be disadvantaged compared to the US. Will Trump's deregulation agenda incite others to cut the red tape?

Trump: let's cut the red tape

In his first week as President, Donald Trump signed an executive order implementing an immediate freeze on new federal regulations.

In recent weeks, Donald Trump has directed that the DOJ pause all enforcements under the Foreign Corrupt Practices Act (an anti-bribery and accounting practices legislation intended to maintain integrity in business dealings), for 180 days whilst the DOJ is preparing new guidelines for prosecutors. This is part of a broader and significant shift in priorities for DOJ enforcement, which is being narrowed to combat organised crime, potentially at the cost of policing other forms of corruption. It is worth noting that the executive order does not prevent: civil enforcement of the FCPA by the DOJ or the SEC's FCPA enforcement function (however, some US commentators expect that the SEC may face challenges pursuing FCPA cases without the benefit of DOJ investigative efforts; moreover, in light of this policy shift, the SEC may be unwilling to approve FCPA civil enforcement actions). Although enforcement by US state or foreign agencies such as the UK SFO will also remain technically unaffected, there may be an impact caused by the removal of the DOJ's support in cross-border criminal corruption investigations.

The White House has promised to eliminate 10 regulations for each new regulation issued to "unleash prosperity through deregulation." Buckle up - the US is determined to sever the red tape and make it easier for US firms to do business.

This month, Donald Trump fired the head of the Consumer Financial Protection Bureau and directed all employees to "cease all supervision and examination activity". The CFPB was created in the wake of the 2007-08 financial crisis and is tasked with writing and enforcing rules applicable to financial services companies and banks, prioritising consumer protection in lending practices. The shutdown of the CFPB is being challenged in a lawsuit before the District Court of Maryland, brought by a coalition of 23 State attorney-generals, who submit dismantling the CFPB would harm consumers and make consumer protection laws harder to enforce

Governments and regulators in the UK and EU will be keenly watching the developments of the new U.S government as the deregulation changes in the U.S will impact the UK and EU markets, particularly where any misalignment between the two could put UK and EU banks and other companies at a competitive disadvantage against U.S firms.

UK - grow, baby grow

In the UK, Prime Minister Kier Starmer has made it clear that growth is a significant priority for his government. On 16 January 2025, Chancellor Rachael Reeves asked that the financial regulators "tear down regulatory barriers" that hold back economic growth, suggesting that post-financial crash regulation has "gone too far".

In response, the Financial Conduct Authority (FCA) has outlined plans to remove unnecessary regulation, including simplifying responsible lending and advice rules for mortgages, supporting home ownership, opening discussions on balancing access to lending with default risks, and reducing anti-money laundering measures, with the view to fostering economic growth. However, the FCA is also committed to embedding its relatively new Consumer Duty principle, which encourages the fair treatment of customers and creates more regulatory hoops for firms to jump through. The regulator has also come under huge criticism in the last year for its proposals to publicly identify firms under investigation, which several critics from the industry, politicians and the media have labelled as 'anti-growth'.

The government has signalled that the Competition and Markets Authority's approach to growth is insufficient. The former chair of the CMA has been replaced in the interim with the former UK head for Amazon. The head of the UK financial ombudsman has also recently resigned, some speculating that this is due to clashes regarding the government's pro-business approach.

Further action towards promoting growth through deregulation is expected, following Chancellor Rachael Reeves' announcement on 18 February ordering a full audit of all 130 regulators, to consider whether they align with the Government's growth agenda, and to identify whether any regulators should be scrapped.

These developments indicate the pressure regulators are under to promote growth and the potential difficulty this creates for balancing their obligations to protect consumers and maintain market integrity, against the Government's growth agenda.

What about new rules on capital requirements?

In 2024, the US delayed its implementation of Basel 3.1 (an international regulatory framework designed to strengthen bank capital requirements and promote financial stability). With Trump at the helm, there is real doubt about whether the US will implement the framework. The UK and the EU have also delayed implementing the new rules (the UK to 2027 and the EU to 2026) – no doubt they are unwilling to input new restrictions that might leave domestic banks at a disadvantage against US competitors. This ongoing delay on the one hand raises questions on the potential risks posed to the integrity of financial systems and consumer protections, and on the other hand questions on whether Basel 3.1 achieves an appropriate balance between regulation and facilitating growth.

Will we see further deregulation?

The momentum from the Trump administration indicates that we will see big cuts to regulation in the US. Similarly in the UK, the government has clearly expressed a desire to promote growth through reducing red tape.

The UK Treasury has described the government's plan as working with regulators to re-balance the approach to regulation and to regulate for growth rather than risk, whilst maintaining high international standards of consumer protection.

FCA Chair Ashley Alder has warned against a “race to the bottom” in financial regulation, emphasising the importance of maintaining high international standards to prevent risks reminiscent of the 2007-08 financial crisis.

Therefore, 2025 is shaping up to be a big year for deregulation in the US and the UK. However, the UK Government's actions and rhetoric so far, indicate a more cautious approach, evident in the plan to work closely with regulators to identify opportunities for growth, to conduct an audit to understand the regulator's alignment with a growth agenda, and in the government's expressed desire to maintain high standards of consumer protection.