Bank shares have risen on news Donald Trump will today roll back Dodd-Frank banking regulation, according to a senior member of the US President’s administration.
Gary Cohn, the director of the White House National Economic Council, said dismantling the regulation, which is aimed at avoiding another Lehman-style crisis, means US consumers will have "better choices".
"Americans are going to have better products because we're not going to burden the banks with literally hundreds of billions of dollars of regulatory costs every year.”
Cohn is a former Goldman Sachs chief operating officer, who has previously said Dodd-Frank regulation hindered the flow of capital to businesses. He made the remarks in an interview with the New York-based Wall Street Journal.
The news sent shares in banks to the top of the FTSE 100. Barclays shares had gained 2.51 per cent at the time of publication, while Royal Bank of Scotland gained 1.84 per cent.
Trump regularly railed against the Dodd-Frank Act on the campaign trail, and on Monday called the act a “disaster”, promising to “do a big number” as part of his anti-regulation push, according to the New York Times.
The Dodd-Frank act was introduced in 2010 in order to prevent a repeat of the banking crisis of 2008. The sweeping act forced banks to hold higher capital reserves to avoid collapse in the event of a similar economic crash.
The Volcker Rule, part of the act, also stopped proprietary trading desks at banks, which were seen as a major contributor to the financial crisis by proponents in the Obama administration.
While the regulation cost banks millions of dollars to comply, it has been praised by influential economists, including Federal Reserve chair Janet Yellen, as a positive move to strengthen the world’s financial system.
Bank leaders have also come out against a wholesale repeal of the act, pointing to the massive operational changes they have been forced to make to comply.