How the 2023-2024 Supreme Court Term Will Affect the Financial Services Industry - Part II: Impact on Rulemaking

As noted in our recent Advisory, key decisions from the 2023-2024 U.S. Supreme Court term presage a "seismic shift" in administrative law that could trigger "a tsunami of lawsuits" against the federal government. At a minimum, the financial services industry is facing significant uncertainty as to what regulations and regulatory decisions will survive legal challenges. Among the near-term implications of the Court's rulings for financial services companies are increased litigation challenging agency actions; more incentive for the federal banking agencies to act less transparently; a greater need for the federal banking agencies to more completely address significant comments in the rulemaking process; and further contested enforcement actions.

Part II: Supreme Court Impact on Rulemaking

The U.S. Supreme Court’s recent administrative law rulings are likely to have a significant impact on the federal banking agencies’ regulatory rulemaking process over time, in obvious and not obvious ways. Loper Bright brings to an end Chevron’s judicial deference to the reasonable interpretation of ambiguous statutes, with unpredictable consequences for the banking agencies that may include more scope for litigation from regulated parties. It does preserve agency discretion where there has been an affirmative delegation to agencies and does not, for the moment, touch Auer deference, the deference accorded to an agency’s interpretation of ambiguous regulations and a keystone of bank regulatory practice. Cantero indicates a Court that is newly willing to examine the contours of National Bank Act preemption, and may augur more state law regulation of national bank operations. And that’s not all.