Banking Outlook 2026: Leading Through Tariffs, Rate Cuts, and the M&A Wave with AI

The past year has proven that volatility isn’t a phase banks wait out — it’s the operating environment. The forces reshaping the landscape have shifted shape since 2025: a Federal Reserve that has pivoted from raising rates to cutting them, a tariff regime upended by the courts, and a bank M&A wave moving faster than at any point in decades. What hasn’t changed is the speed. Policy, rates, and competitive dynamics can rearrange a bank’s outlook in days, and stability — when it appears — is fleeting.

This pace of change has transformed the chief financial officer (CFO) from a traditional financial steward into a strategic navigator. Today’s finance leaders are no longer confined to closing the books and reporting history. Instead, they must collaborate across the C-suite to anticipate what comes next, model its potential impact, and guide strategic responses — often in real time.

To explore this shift, we launched Finance 2035 for Financial Services. After surveying and interviewing more than four hundred Financial Services CEOs, CFOs, business leaders, and investors, the research shows that expectations have multiplied:

• 77% of leaders say the CFO’s remit has expanded significantly in the past three to five years.
• 69% of industry leaders and 87% of investors believe the role will be even more critical by 2035.
• 78% of CEOs and line-of-business managers already expect CFOs to act as ambitious growth drivers.

Together, these insights highlight the rising demand for the Office of Finance to guide the enterprise with agility, foresight, and continuous performance monitoring — especially when the environment is constantly evolving.

A year ago, the challenge was absorbing the cost of higher-for-longer rates. In 2026, the script has flipped. The Federal Reserve began cutting in late 2025 and is expected to ease further this year, moving policy out of restrictive territory. For banks, that’s a double-edged sword: lower rates can stimulate loan demand, but they also compress margins on the deposit side and squeeze net interest income.

Regulators are watching the same pressure points. The NCUA’s 2026 supervisory priorities center on earnings and capital adequacy, elevated funding costs, interest-rate risk, and liquidity — along with the unrealized losses still sitting on long-duration securities acquired in the low-rate era. The FDIC’s 2026 Risk Review echoes the theme, flagging net interest margins, deposit growth, and funding stability as core concerns.

The takeaway for finance leaders: precision matters more than direction. CFOs need to run parallel forecasts across multiple rate paths — not just how high or low rates go, but how quickly assets and funding reprice — and recalibrate the moment new data lands. What was once a quarterly planning exercise has become a continuous cycle of adjustment across margin, liquidity, and capital.

Few policy areas have whipsawed banks harder than trade — and over the past year, the ground shifted not through negotiation but through the courts. In February 2026, the Supreme Court struck down the tariffs imposed under the International Emergency Economic Powers Act (IEEPA), ruling that the authority had been stretched beyond its limits. A flat 10% tariff was then enacted under Section 122 of the Trade Act of 1974 — a time-limited measure with a built-in expiration.

The net effect is a very different number than a year ago. The average effective U.S. tariff rate has fallen to roughly 11–12%, down sharply from its 2025 peak, though still the highest in more than eighty years. But for finance leaders, the headline rate is almost beside the point. The real story is structural instability: the legal basis for tariffs is now contested, billions in previously collected duties are slated to be refunded to importers over the course of 2026, and the Section 122 measure itself could expire — or be extended — within months. Rates have already been revised more than forty times since 2025, and there’s little reason to expect that pace to slow.

For banks, this isn’t an abstract trade debate. Shifting tariffs flow straight into risk models and hedging strategies, into cross-border lending, commodity financing, and trade-credit lines, and ultimately into liquidity planning and credit provisioning for clients whose cost structures move with every announcement. A tariff assumption baked into a static annual plan is obsolete the moment the next ruling or proclamation lands.

This is exactly why policy sensitivity can’t live in a spreadsheet. Banking CFOs need to model multiple tariff scenarios in parallel, quantify the downstream impact on borrowers and the balance sheet, and refresh those forecasts the instant the rules change — turning a moving target into a managed variable.

The One Big Beautiful Bill Act (OBBBA), signed in 2025, is now roughly a year into implementation — and its effects are moving from projected to real. Tax relief for individuals, small businesses, and corporations is feeding cash flow, easing default risk, and supporting new loan demand, particularly in incentive-favored sectors such as aerospace and defense and U.S.-based manufacturing. For banks, that creates openings to reallocate capital and design products aimed at emerging, high-growth demand.

With the upside come new operational responsibilities that are now live, not theoretical. Lenders must issue IRS reporting tied to the new auto-loan interest deduction, requiring updated processes and systems. And a new tax-advantaged savings program for newborns is channeling fresh deposits onto bank balance sheets, providing a liquidity buffer for institutions positioned to capture them. A year in, the differentiator isn’t awareness of OBBBA — it’s execution: the banks reallocating capital quickly and launching tailored products while staying compliant are the ones turning legislation into advantage.

If 2025 reopened the door to bank consolidation, 2026 has banks moving through it at speed. The regulatory backdrop that once stalled deals for a year or more has reset: the average time to close fell from 178 days in 2024 to 140 in 2025, and approvals are now clearing in as little as four months — the fastest pace in roughly three decades. The pipeline reflects it. Bank M&A announcements in 2025 reached their highest level since 2021, and the first quarter of 2026 produced the largest Q1 combined deal value since 2019.

The deals themselves have gotten bigger and more strategic. Recent transactions include Fifth Third’s $10.9 billion acquisition of Comerica, Santander’s roughly $12 billion purchase of Webster Financial, Pinnacle’s merger of equals with Synovus, Huntington’s $7.6 billion acquisition of Cadence Bank, and PNC’s acquisition of FirstBank — a clear signal that super-regional banks are bulking up to compete on scale, technology, and deposits.

Two forces are accelerating the trend. First, the Federal Reserve’s 2026 proposal to recalibrate Basel III and GSIB capital rules would relieve much of the balance-sheet penalty that previously discouraged mid-sized banks in the $50–$500 billion range from expanding — turning capital from a constraint into an enabler of growth. Second, with the 2026 midterm elections approaching, many boards see a finite window of regulatory openness and are choosing to act now. The likely result is a “barbell” market: a more powerful tier of super-regionals on one end, and a long tail of smaller banks pursuing mergers of their own on the other.

For the Office of Finance, M&A is where strategy meets execution risk. Every deal demands rapid, defensible modeling of the combined balance sheet, capital, and earnings; clarity on which regulatory tier the new institution will land in; and the ability to consolidate disparate finance systems and data without losing months to integration. The banks that can model a transaction’s impact in days — not quarters — and unify reporting quickly afterward are the ones that actually capture the synergies the deal was designed to deliver.

Even as federal oversight relaxes in key areas — from a more accommodating posture on M&A to the proposed easing of capital requirements — regulatory complexity hasn’t disappeared. It has migrated. State regulators are moving in the opposite direction, expanding requirements in areas such as fair-lending disclosure and consumer protection for digital banking. The result is a patchwork: federal leniency in some areas, state-level tightening in others, and compliance obligations that can shift depending on where an institution operates. For finance and risk teams, that means compliance exposure has to be modeled as a live variable, not a fixed assumption — particularly for banks expanding into new states through the M&A wave.

The pace and magnitude of change across rates, tariffs, taxes, and consolidation make static planning cycles unworkable. Finance leaders can’t wait until quarter-end to respond — they need tools that absorb new signals, recalibrate forecasts instantly, and guide strategy in real time. That’s why AI has moved to the center of the bank CFO playbook. The question in 2026 is no longer whether to adopt it, but how to scale it: 88% of financial-services CFOs now say AI is critical to finance operations, yet only a fraction have moved it beyond pilots and into production. Closing that ambition-to-execution gap is the defining finance challenge of the year.

The adoption of AI in banking initially took root in customer-facing and risk functions: personalized chatbots and virtual assistants, the analysis of standard and alternative credit data to support underwriting, and anomaly detection across Know Your Customer (KYC), Anti-Money Laundering (AML), and fraud.

Within the Office of Finance, the use cases are now multiplying — into forecasting, scenario planning, and real-time analysis. AI-enhanced models run in parallel with traditional driver-based approaches, giving CFOs a second lens to rapidly validate or challenge assumptions in an environment where revisions and shocks are the norm. The breakthrough is the shift from automation to decision intelligence, enabling finance teams to move beyond static models and continuously sense and adapt:

• Predictive capabilities turn external signals — macroeconomic data, policy updates, market shifts — into rolling forecasts that update as often as daily.
• Agentic AI accelerates the shift further, letting finance teams interact with AI agents as an extension of the team, using natural language to surface insights.
• The impact of a tariff change, a tax provision, or a Fed move can be quickly reflected in profitability, capital, and liquidity outlooks.

In a world where stability has the shelf life of weeks or even days, foresight and speed let CFOs lead proactively rather than react after the fact.

Amid relentless market volatility and a shifting regulatory landscape, fragmented point solutions only complicate finance operations — creating silos and slowing access to the analysis decisions depend on. The Office of Finance needs a single platform that unifies core finance, contextualizes results with operational data, and embeds AI directly into critical workflows. OneStream brings all three together in one unified, extensible solution, powered by a plug-and-play architecture, so CFOs can lead with speed and confidence.

At OneStream, AI doesn’t live off to the side. SensibleAI™ is embedded in the platform, drawing directly on governed, unified data — so you don’t need a PhD in data science to get value. The portfolio has expanded to meet finance teams where they work: SensibleAI Forecast for no-code predictive forecasting, SensibleAI Agents that retrieve data and run multi-step analysis on command, Operational Data Chat for plain-language querying, and a Line Item Modeling engine with prepackaged planning solutions for workforce, contracts, and other time-bound commitments. Together, these capabilities turn context into clarity, automate complexity without sacrificing control, and give finance leaders confidence in every decision.

The result: OneStream enables bank CFOs to turn volatility into advantage, delivering insights and decisions that withstand scrutiny from both regulators and the boardroom.

The events of the past year confirm a simple truth: volatility is no longer the exception — it’s the environment in which banks operate. What has changed is its shape. Rising rates have given way to an easing cycle, an escalating tariff regime has been reset by the courts, consolidation has accelerated into a full-fledged wave, and AI has moved from promise to production imperative. For CFOs, the path forward is the same in every scenario: build resilience through agility, embed sensitivity into every forecast, and elevate finance from record-keeper to the strategic engine steering the enterprise.

Learn how OneStream can help you turn shocks into opportunities — to guide strategy, accelerate growth, and lead with confidence.