Community Bank Regulations in 2025: Trump’s Deregulatory Agenda

The regulatory environment for community banks is entering a period of rapid change in 2025, driven by the Trump administration’s second term and a renewed push for deregulation. With the Republican Party now controlling both the executive and legislative branches, the White House has begun reshaping the financial regulatory system in ways that could ease compliance burdens for smaller institutions, while also introducing new uncertainties.

For community banks, this evolving landscape presents a mix of opportunity and risk. Key themes include streamlined merger reviews, disbanded advisory councils, rollback of consumer protection mandates, and possible restructuring of oversight agencies.

One of the first major moves came in February 2025, when President Trump revoked President Biden’s 2021 Executive Order, "Promoting Competition in the American Economy,” which had encouraged additional federal regulator scrutiny on some bank mergers and acquisitions. The repeal is expected to accelerate deal approvals and reduce delays for institutions seeking growth through consolidation.

That same month, Trump issued an executive order to reduce the size of the Federal bureaucracy, including dismantling the Community Bank and Credit Union Advisory Councils, eliminating a forum that had provided industry feedback to federal regulators. The move has raised concerns about how smaller institutions will have their voices heard in Washington.

Administration officials have also signaled interest in consolidating oversight agencies such as the FDIC and OCC. Proponents argue this could reduce duplicative exams and compliance complexity for banks, while critics warn it may introduce political volatility into what had been technocratic processes.

Broader deregulatory momentum is visible across sectors, with analysts forecasting $900 billion to $1 trillion in reduced regulatory costs over the next several years. For community banks, the benefits could include lighter compliance obligations and greater flexibility in lending practices.

Federal Reserve Governor Michelle Bowman, who was sworn in as Vice Chair for Supervision in June 2025, has continued to advocate for differentiated regulation based on asset size and risk exposure. While no formal rule changes have yet been finalized, community banks are closely watching potential moves to:

Treasury Secretary Scott Bessent has also expressed support for tailored regulatory treatment, signaling that categorical exemptions for community banks remain on the table.

Not all developments favor community banks. The administration has targeted cuts to the Community Development Financial Institutions (CDFI) Fund, which supports over 1,400 mission-driven lenders serving low-income and rural areas throughout the United States. These cuts could reduce capital access in markets where community banks play a critical role. In August, a bipartisan group of Senators wrote to Director of the US Office of Management and Budget Russell Vought, asking when $324 million in approved CDFI funding would be released to the Treasury Department.

At the same time, potential consolidation of oversight agencies could inject new political dynamics into regulatory decision-making, creating longer-term uncertainty.

For community banks, 2025 presents a new regulatory reality: potentially lighter compliance in some areas, greater uncertainty in others. Streamlined M&A processes, elimination of advisory councils, and ongoing debates about agency consolidation underscore the need for proactive planning.

To navigate this landscape, institutions should leverage trusted advisors like CSH, who specialize in banking compliance and regulatory strategy. Maintaining a balance between seizing growth opportunities and managing emerging risks will be critical.

By staying informed, adaptable, and committed to their mission, community banks can continue to thrive as pillars of local economic health, regardless of the national policy winds. Connect with CSH today to learn how we can support your institution.

written by: Jenna Skop