In a letter this week to President Biden, American Bankers Association President and CEO Rob Nichols warned that the large number of regulatory initiatives currently under consideration by banking regulators will have a chilling effect on the financial sector and broader U.S. economy, resulting in further tightening of credit, higher prices for banking services and more bank consolidation. To avoid this outcome, Nichols asked Biden to direct Treasury Secretary Janet Yellen, in her capacity as chairwoman of the Financial Stability Oversight Council, “to complete a comprehensive interagency economic impact analysis of the various rule changes that are taking place in siloes across your administration before any new regulations can take effect.”
Among these numerous and largely uncoordinated policy initiatives are new capital regulations, a 1,500-page rewrite of the Community Reinvestment Act, payment rules on transaction routing and business-to-business payment caps, rulemaking on small business lending data reporting, a rehaul of the Federal Home Loan Bank system, and proposed revisions of rules for bank custody businesses. Implementing any of the rules on their own would be a significant challenge for banks, but together they mean banks of all sizes will face higher costs for deposits, making loans, running basic payment programs and implementing cybersecurity and other critical systems, Nichols said.
“We recognize that a strong banking sector needs a clear set of rules, but compliance can be expensive,” Nichols said. “As a result, banks are understandably seeking scale to overcome the economic costs imposed by Washington no matter how well intended. This reality makes it all the more important to make sure any new rules will do more good than harm.”
“If preserving the dynamic, diverse U.S. banking system remains a priority for the nation and access to affordable banking services for every American a table-stakes imperative, I encourage you to ask tough questions about the regulatory tsunami now forming and whether it is consistent with your goals to increase economic growth and expand opportunities for all Americans,” Nichols said. He also requested that Biden and his economic team meet with the ABA board of directors so bankers could share their concerns and speak about developing a policy framework that achieves a vibrant and inclusive economy.
