Federal and state shifts signal changes for Florida banking

Written by Genevieve Bowen on January 15, 2025

Amid the change in the US administration, Florida’s financial industry is closely monitoring potential federal and state legislative and regulatory shifts that could impact the future of banking operations.

Financial institutions in Florida anticipate that the new administration may pursue policies to reduce regulatory burdens, advance cryptocurrency and address state-level legislative developments that intersect with federal oversight.

This anticipation mirrors sentiments across the national financial sector, where industry leaders are hopeful for a more relaxed regulatory environment that encourages technological advancements and economic expansion.

Potential candidates for key banking regulatory positions have indicated plans to ease regulations and support emerging technologies, including cryptocurrencies. For instance, FDIC Vice Chairman Travis Hill has outlined intentions to reduce regulatory burdens on banks and encourage crypto innovation.

Mr. Hill is expected to become acting chairman of the FDIC when Martin Gruenberg steps down at the end of the Biden administration. Similarly, Federal Reserve Governor Michelle Bowman has advocated for tailored oversight that balances economic growth. These perspectives suggest a potential shift towards a lighter regulatory touch under the incoming Trump administration.

In Florida, recent state legislation has increased oversight of financial institutions, particularly concerning environmental, social and governance (ESG) principles used to evaluate a company’s sustainability and ethical impact. In 2023, the legislature enacted House Bill 3, prohibiting the use of ESG factors by state and local governments when issuing bonds.

Additionally, the “unsafe and unsound practice” standard introduced in the bill prohibits financial institutions from denying or canceling services based on political or religious views. It also bars the consideration of “social credit scores” in banking and lending decisions, which include factors like a person’s ideological beliefs, lawful firearm ownership or involvement in related industries, participation in fossil fuel, timber, mining, or agriculture sectors, support for government actions on illegal immigration, drug trafficking, or human trafficking, and engagement with individuals or entities linked to these areas or whether they adhere to ESG standards.

Last year’s House Bill 989, effective as of July 1, 2024, expanded the rules to any financial institution operating in Florida and created a new consumer complaint procedure designed to ensure fair access to banking and prevent politically or ideologically motivated denial of services. The bill requires financial institutions to annually file an attestation with the Florida Office of Financial Regulation (OFR) confirming they do not engage in discriminatory practices.

Looking ahead to the 2025 legislative session, Florida’s Chief Financial Officer Jimmy Patronis proposed the creation of a “Sunshine Freedom Bank,” a public bank that would manage state funds instead of relying on private financial institutions. The bank would “provide the opportunity to manage taxpayer dollars completely in the State of Florida, save on administrative costs, increase investment earnings, and improve Floridians’ bottom line by saving taxpayer dollars,” according to the August 2024 press release announcing the proposal.

“The Sunshine Freedom Bank would also protect taxpayers from large financial institutions that impose extreme banking and investment regimes – such as Environmental, Social and Governance credit scores and Diversity, Equity and Inclusion (DEI) discrimination,” the release continued, adding “these institutions are under intense regulatory pressures to impose expensive, non-banking policies, such as ESG and DEI. They also engage in the insidious practice of “debanking,” or dropping customers and freezing their accounts over their political and religious beliefs – which Florida proudly banned.”

The plan calls for the state legislature to fund a feasibility study to assess the costs, regulatory requirements, establishment of a board and timeline and potential impact of such a bank.