8 Financial ETFs to Chase After Bank Deregulation

This article was originally published on ETFTrends.com.

The Senate recently passed a bill to loosen some of the more draconian regulatory restrictions placed on banks in response to a post-financial downturn environment, potentially giving financial stocks and sector-related exchange traded funds more room to run.

On Wednesday, a Senate bill passed 67 votes to 31, freeing more than two dozen banks from some of the harshest regulatory rules placed after the 2008 global financial downturn, the Washington Post reports. The bill enacted a number of significant rollbacks to banking rules that forced banks to take on conservative positions to obviate another financial crisis.

“The bill provides much-needed relief from the Dodd-Frank Act for thousands of community banks and credit unions and will spur lending and economic growth without creating risks to the financial system,” White House press secretary Sarah Huckabee Sanders said.

Observers note that the bill may be particularly beneficial to smaller banks as many local banks and credit unions suffered the most under the onerous restrictions.

“It is a bill that I am incredibly proud of,” Democratic Sens. Heidi Heitkamp (N.D.) said in a Senate floor debate this week. “Dodd-Frank was supposed to have stopped too big to fail, but the net result has been too small to succeed. The big banks have gotten bigger since the passage of Dodd-Frank, and the small banks have disappeared.”

For instance, banks with a Systemically Important Financial Institution designation had to adhere to stricter rules and oversight on the basis that their failure was seen as a danger to the economy. The new increased threshold to $250 billion in assets from $50 billion would affect several large regional banks, including BB&T, Fifth Third Bank, and SunTrust, which would no longer be subject to the more stringent SIFI rules, according to Business Insider.

Rolling back some of the regulatory rules could have a positive impact on the financial sector and related ETFs, such as the Financial Select Sector SPDR (NYSEArca: XLF), Fidelity MSCI Financials Index ETF (NYSEArca: FNCL), iShares U.S. Financials ETF (NYSEArca: IYF) and Vanguard Financials ETF (NYSEArca: VFH).

In particular, banks could capitalize on the regulatory rollbacks. For bank exposures, investors can look to options like the iShares U.S. Regional Banks ETF (NYSEArca: IAT), SPDR S&P Regional Banking ETF (NYSEArca: KRE), PowerShares KBW Regional Bank Portfolio (NYSEArca: KBWR) and SPDR S&P Bank ETF (NYSEArca: KBE), which take a larger focus mid- and small-sized regional banks.

For more information on the financials sector, visit our financial category.