The stock market was having a generally strong day to start the week, with the S&P 500 up by about 0.6% as of 2:45 p.m. EST. However, the financial sector was performing significantly better, especially when it comes to the big banks. Wells Fargo (WFC -0.53%) was a particular standout, with shares up by as much as 3% on Monday.
A big regulatory move for banks
There isn't a company-specific reason for the strong performance. Instead, the move is being fueled by the announcement that the Federal Reserve's top banking regulator, Michael Barr, whose official title is vice chair for supervision, is stepping down from his role effective Feb. 28.
Barr had previously said he intended to finish his term, which ends in 2026. He had been leading the charge to raise capital requirements and generally increase banking regulations. There was widespread speculation that President-elect Donald Trump would try to remove Barr after taking office, but now any potential dispute is off the table.
What happens now?
For the time being, nothing will happen. And that's generally good news for banks. The Federal Reserve said in the press release announcing Barr's decision that it won't make any major changes to bank regulations until Barr's successor is named.
What we don't know is who Trump will appoint to fill the role, but it is likely to be someone far more in favor of bank deregulation. And this could help create a more favorable environment for banks to grow and make money.
