Inside Year One: Banking and Financial Services Developments Under a New Administration

This article is part of Inside Year One: Key Developments Under a New Administration. Click here to read the full newsletter.

Post-Government Reopening and Legislative Priorities

After a 43-day shutdown, the federal government officially reopened on November 13, 2025, after approval from the Senate, House, and President. The deal included FY26 funding for the appropriations bills covering the Legislative Branch, Military Construction & Veterans Affairs, and Agriculture, while stopgap funding in the form of a continuing resolution extends funding for the rest of the federal government through the end of January. As of January 1, 2026, nine appropriations bills remained pending, creating uncertainty for several industries, including banking and financial services (BFS).

The House Financial Services Committee demonstrated notable productivity in late summer and early fall, advancing several bipartisan initiatives despite the shutdown slowing momentum. There is growing legislative interest in cryptocurrency, artificial intelligence, and stablecoin regulation, signaling a shift toward modernizing financial oversight. In particular, there is serious bipartisan interest in cryptocurrency and AI legislation. Stablecoin bills are positioned to move quickly in the coming months, although the current political landscape may impact that trajectory. Additionally, the Committee passed the Community Bank Leverage Ratio Act in November, easing requirements for smaller financial institutions. Other significant measures include the Bank Competition Modernization Act and the Financial Technology Protection Act, the latter currently under Senate consideration.

Market Trends and Emerging Risks

The alternative lending market continues its rapid expansion, now valued at $3 trillion and projected to surpass $5 trillion within the next three to four years. This growth underscores the increasing role of nontraditional lenders in the broader economy. Bank lending (whole loan) is up approximately 50% year-over-year, evidencing the fact that bank direct lending anxiety is subsiding. While regulatory oversight is loosening, be on the lookout for a Basel re-proposal in 2026 with respect to capital requirements which may impact lending activities. At the same time, Earned Wage Access products are facing heightened regulatory and litigation scrutiny, reflecting concerns about consumer protection and compliance. Adding to the sector’s challenges, a major $100 million fraud case has recently affected several regional banks, reinforcing the need for stronger risk management and fraud prevention measures across the BFS industry.

Implications for Financial Sector Companies

Taken together, these developments signal a period of accelerated change for financial services. Legislative priorities around digital assets and AI will reshape compliance frameworks, while the growth of alternative lending introduces new competitive dynamics and risk considerations as banks continue to increase refinancing lending volumes. Institutions must prepare for heightened regulatory scrutiny, particularly in emerging product categories like Earned Wage Access, and strengthen fraud detection capabilities in light of recent high-profile cases. The evolving landscape presents both opportunities, such as innovative lending solutions, and challenges, including navigating complex regulatory environments. Strategic agility and proactive risk management will be critical for success in this new era.

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This alert is a periodic publication of Ballard Spahr LLP and is intended to notify recipients of new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have.