The future of banking is bright, provided the policy environment continues to support growth, bank CEO Jim Reuter said in prepared testimony submitted ahead of a House Financial Services subcommittee hearing today. Reuter—who is president and CEO of Denver-based FirstBank added that as nonbank competition continues to rise, policy gaps that promote regulatory arbitrage and put the financial system and consumers at risk need to be closed.
“Many nonbank competitors have business models that rely on a kind of regulatory arbitrage in which they can offer one or several aspects of the banking bundle while avoiding the full banking regulatory framework,” said Reuter, who previously served as chair of the American Bankers Association’s American Bankers Council and Government Relations Council, testifying on behalf of ABA. “We see this clearly in the rise of payments charters or ‘special purpose national bank charters’ that would aim to provide payments system access to companies that—because they do not hold insured deposits or do not lend—would not be subject to the same regulations as banks. In essence, they want a seat at the dinner table but without having to eat their vegetables.”
Reuter noted that the most innovative technology will continue to come from private-sector leadership, and pushed back against the idea of the government offering consumer accounts, either through the Federal Reserve or through the U.S. Postal Service. Advances like real time payments were available through banking industry innovation long before they will be available through a government-developed solution, he said.
Turning to financial inclusion, Reuter called on policymakers to promote solutions like Bank On-certified accounts, “which welcome all consumers into the regulated banking system and help to build a solid foundation for economic growth.”