US President Trump signs executive actions to loosen banking constraints

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US President Donald Trump on Friday scaled back major regulations that resulted from the financial crisis, directing a review of the Dodd-Frank Act and putting the brakes on a retirement advice rule.

As a part of his plan to overhaul financial regulatory system, Trump's move marks a step toward realizing his campaign promise to dismantle the 2010 Dodd-Frank law, which was passed in the wake of the 2007-2009 financial crisis.

The landmark 2010 law marked the biggest Wall Street regulatory overhaul in decades. Under the law, regulators have introduced strict new capital standards on banks, called for annual stress tests for systemically important banks, and created the Consumer Financial Protection Bureau.

US President Donald Trump shows an executive order directing the Treasury Secretary to review the Dodd-Frank financial oversight law in the Oval Office of the White House on February 3, 2017 in Washington, DC. /CFP Photo

"We expect to be cutting a lot out of Dodd-Frank," Trump said at a meeting with a group of business leaders earlier Friday. He added that companies "can't get any money because the banks just won't let them borrow it because of the rules and regulations in Dodd-Frank."

The executive order "sets the table for a regulatory system that mitigates risk, encourages growth, but more importantly, protects consumers," White House spokesman Sean Spice said Friday.

Bank stocks surged following Trump’s executive order, with Morgan Stanley up 5.4 percent, JPMorgan and Goldman Sachs were up 4 percent, and the Financial Sector Select SPDR rising nearly 2 percent on Friday.

Robert Ravnaas, chairman and chief executive officer of Kimbell Royalty Partners LP, center, stands on the floor of the New York Stock Exchange (NYSE) during the company's initial public offering (IPO) in New York, US, on Friday, February 3, 2017. /CFP Photo

Although Trump accused of the financial regulatory law, he can' t do away with it because only the Congress can rewrite the legislation.

Trump on Friday also signed a presidential memorandum and required the Department of Labor to review a retirement saving rule.

The retirement advice rule issued by the Obama administration in 2016 is set to take effect in April. The rule requires brokers to act as "fiduciaries," or in their clients' best interests, when they are advising them about their retirement plans. Many financial institutions opposed the rule as they believed the regulation would raise costs and make small accounts unprofitable.

US President Donald Trump chats with reporters on board Air Force One before departing from Andrews Air Force Base in Maryland, bound for Palm Beach, Florida on February 3, 2017. /CFP Photo

"The rule's intent may be to have provided retirees and others with better financial advice, but in reality, its effect... is to limit the financial services that are available to them," said Spicer.

Trump's memo on the fiduciary rule is likely to spark major push back by Democrats, who say the rule is key to protecting consumers from conflicts of interest.

The US Chamber of Commerce and other financial services trade groups have filed a legal challenge to the rule seeking to have it overturned. The federal judge reviewing the case signaled in a court filing on Thursday that she plans to issue a decision no later than February 10.

(With inputs from Reuters)

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