Bank stocks and financial sector exchange traded funds climbed Friday on reports that President Donald Trump is ready to undo regulatory restrictions on the industry.
On Friday, the PowerShares KBW Regional Bank Portfolio (NYSEArca: KBWR) gained 2.6%, SPDR S&P Regional Banking ETF (NYSEArca: KRE) rose 2.4%, SPDR S&P Bank ETF (NYSEArca: KBE) increased 2.4% and First Trust NASDAQ ABA Community Bank Index Fund (NasdaqGM: QABA) advanced 2.3%.
Meanwhile, the broader iShares U.S. Financial Services ETF (NYSEArca: IYG) returned 2.4% and Financial Select Sector SPDR (NYSEArca: XLF) was 1.8% higher.
The financial sector, notably bank stocks, strengthened on prospects that Trump would sign an executive action Friday that would establish the framework to scale back the 2010 Dodd-Frank financial-overhaul law, part of the administration’s plan to dismantle much of the regulatory system enacted after the financial crisis, the Wall Street Journal reports.
“Americans are going to have better choices and 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,” White House National Economic Council Director Gary Cohn told the WSJ. “The banks are going to be able to price product more efficiently and more effectively to consumers.”
Cohn argued that existing regulations under Dodd-Frank are so sweeping that it is too hard for banks to lend and consumers’ choice of financial products is limited.
Cohn also said that the executive order could pave the way for additional orders that would affect the postcrisis Financial Stability Oversight Council, the committee overseeing the winding down of a giant faltering financial company and the way the government supervises large financial companies that aren’t traditional banks.
“This is a table setter for a bunch of stuff that is coming,” Cohn said.
The Trump administration has been seen as friendly toward Wall Street banks, especially as President Trump fills out his administration with members of Congress and Wall Street executives, including Cohn who retired as president of Goldman Sachs Group (NYSE: GS) to join Trump’s team.
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