Five Ways the Failure of the Chevron Derogation Will Change Banking Regulation

WASHINGTON — The Supreme Court struck down a decades-old legal doctrine in its June decision in Loper Bright Enterprises v. Raimondo. The doctrine’s demise — known as the Chevron deference — promises to reshape banking regulation. The courts will change how judges assess the legality of bank regulations, opening the door to legal challenges to agency rules.

The Chevron doctrine was first established by a 1984 Supreme Court decision. Chevron USA Inc. v. Natural Resources Defense Council, Inc.which generally required judges to give credence to agency interpretations of ambiguous statutes so long as those interpretations were reasonable. In Loper Bright, the court invalidated the Chevron doctrine because, as six of the nine judges argued, the Administrative Procedure Act — the fundamental law governing how federal regulations are written — required courts to conduct their own analysis of the legality of agency regulations rather than defer to the executive branch’s interpretation.

Opponents of Stronger Regulations say the ruling could create a more responsible regulatory landscape, while critics warn it casts significant uncertainty over dozens of rules that could face legal challenges. Agencies will have to be meticulous in their rulemaking, providing clearer justifications for their interpretations, and will have to beef up their legal teams. Congress will have to craft the rules with greater precision, and judges will play a key role in determining the fate of various administrative rules. Here are five ways the Chevron decision could upend banking regulation in the future.