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Market Update

Will Relaxed Regulations Boost Bank Stocks?

With parts of Dodd-Frank rolled back, some banks should be able to boost their earnings. Will their stock prices follow?

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Last month, Congress rolled back a bevy of Dodd-Frank-related reforms, with the hopes of making it easier for small and midsize banks to operate and earn more. It was the most significant easing of financial sector regulations since the recession, when rules were put in place to help prevent another downturn. But these changes aren't putting the country at risk, as some politicians have suggested, says Eric Compton, a bank analyst with Morningstar. 

The deregulation doesn't impact the largest banks (they must still adhere to the same post-recession rules), nor does it allow financial institutions to engage in the risky lending practices that brought down the economy a decade ago.

Bryan Borzykowski does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.