One trend to pay attention to in 2019: consolidation in the banking industry. A lower corporate tax rate and a favorable regulatory environment are giving banks reason to think that next year might be the time to ink a big M&A deal.

Despite the fact that Democrats are set to take control of the House, the fruits of the Trump agenda on tax policy and deregulation are already in full force. Congress slashing corporate taxes from 35% to 21% has companies sitting on a generous stockpile of cash, and Trump-appointed officials at the bank regulators are hard at work on implementing a law rolling back portions of the Dodd-Frank financial regulatory framework. A notable change in the regulation: raising the threshold for extra scrutiny on banks, from $50 billion to $250 billion.

Prior to the regulatory change, banks near the $50 billion threshold were hesitant to make deals because growing in asset size would subject them to a slew of added regulatory requirements.

But with that line no longer there, the floodgates could open for larger banks to make big deals.

David Wright, managing director of Deloitte’s banking regulatory practice, told Yahoo Finance he has had conversations with banks between $50 billion and $200 billion on preparing for future mergers.

“We know that there are regional banks that are actively preparing to be able to execute if and when the numbers work for them,” Wright said.

Out of opportunity

RBC Capital Markets wrote December 12 that over the next 12 to 24 months, banks could be active in the M&A market with plenty of capital to spend. RBC said that in late 2019 or early 2020, it expects consolidation among the larger banks, a space eagerly hoping to reverse a post-crisis period of “anemic” M&A activity.

“We also believe banks today have excess capital and in some cases, management teams consider M&A an attractive alternative to share repurchases,” RBC wrote.

In addition to savings from the Tax Cuts and Jobs Act signed last year, banks could find excess capital from regulatory changes like tweaks to the Federal Reserve’s stress test process known as the Comprehensive Capital Analysis and Review. Unlike other industries, the U.S. banks are not allowed to issue dividends or share buybacks without clearing their capital distribution plans with the Federal Reserve first. But banks between $50 billion and $100 billion — covering the likes of Comerica (CMA) — will no longer be subject to CCAR at all, giving them more freedom to deploy capital in the M&A market.

One dampener on M&A activity is pricing. As RBC notes, the S&P 500 banks are currently trading at 1.61x book value, the latest measure in a 10-year trend of rising valuations. But banks’ return on average capital employed (ROACE) — a measure of efficiency as a proportion of profits to investments — has decreased over the last five years. Combined, this means that less attractive banks are getting more expensive even with the recent sell-off in broad markets.