December 2, 2016 / 2:22 PM / 9 months ago

REFILE-Banks may not win with Trump as president: ex-Obama adviser

(REFILE to fix spelling in graf 1)

By Will Caiger-Smith

NEW YORK, Dec 2 (IFR) - The election of Donald Trump in the US does not necessarily mean the government will go easier on banks, a former adviser in outgoing US President Barack Obama's administration said.

"The idea that Trump is going to mean less regulation than Obama full stop, is way too simplistic an analysis," said Aaron Klein, now a fellow and policy director at influential think tank The Brookings Institution.

Klein served at the Treasury Department as deputy assistant secretary for economic policy during the Obama administration's first term, helping craft the Dodd-Frank Act.

Speaking at S&P's financial institutions conference in New York on Thursday, Klein highlighted president-elect Trump's willingness to move between extreme stances on banking regulation during his election campaign.

As well as suggesting the Dodd-Frank Act should be rolled back, Trump also advocated for the return of the Glass-Steagall Act, which separated commercial and investment banks but was repealed by then-president Bill Clinton in 1999.

Trump takes office on January 20.

"Markets have assumed in the short term with the rally that they have got the deregulatory Trump, but maybe there is this other one," said Klein.

"He has shown an ability to move unconventionally between the two. We don't know which of the two we've got."

The S&P 500 Financials index has risen 14% since the election, while average spreads on high-grade bank debt have tightened by 3bp over the same period.

Klein also pointed to Trump's successful use of populist rhetoric as evidence of a "giant retrenchment" away from globalization.

As cross-border institutions and trade agreements such as the European Union and the North American Free Trade Agreement come under pressure, there is no reason to believe global banking regulation will escape intact, he said.

"If the world order is going to break down in terms of trade the European Union ... why would anyone think banking alone is going to remain an island, moving towards global coordination?" he said. (Reporting by Will Caiger-Smith; Editing by Natalie Harrison and Shankar Ramakrishnan)

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