What Does a Trump Administration Mean for Small Banks?

December 22, 2016         By: Steven Anderson

Lately, small banks have been taking it on the chin thanks to the growth of technology. With robots seen replacing some human functions and mobile banking systems replacing others, the small branch bank has been going out of fashion, and sometimes, out of business.

However, some are wondering if the Trump administration will help light a fire under the small bank and open up new opportunities for the small branch to achieve in some places that a mobile system and a robot just can’t.

On some levels, a Trump administration would be great for small banks. If everything goes according to plan—which is a long shot at best, but still—a tax cut as large as Trump’s would free up cash, prompt spending, and prompt growth to match.

People will be buying more, which means more needs made, which means small businesses will need to step up operations to match the new demand. That means small businesses will be needing loans to bring in new material and cover new expenses in the meantime, and that could be a huge step forward for the small-town bank, since apps and robots won’t be able to run the necessary credit checks and add the human element to making credit decisions.

Better yet, Trump’s pick for Secretary of the Treasury—Steve Mnuchin—plans to gut the Dodd-Frank regulation that requires banks to keep a certain amount of resources on hand to pass stress testing. With that reduced or cut outright, that means less administration cost and more cash available to lend.

A combination of a business environment where small businesses need more loans and more small banks are in a position to lend sounds like a prime environment for growth to follow. Of course, it depends on a lot of things going exactly as they should, and some reports suggest Trump’s planned tax cuts are meeting with a frosty response so far. Who knows what a Dodd-Frank overhaul will bring in reaction?

Only time will tell how it goes, but if the government can get out of its own way, small banks may actually need to do some hiring for a change.