Federal Reserve Governor Michelle Bowman said today that she remained concerned about the data underpinning the Fed’s proposal to further lower the debit card interchange fee cap under Regulation II. In a speech to the Florida Bankers Association, Bowman said that while the proposal was based on a survey conducted by the Fed, the resulting analysis overlooks gaps in the data and ignores the broader context, such as the potential effect of the rule on bank capital and earnings. The analysis also does not take into account recent revisions to Reg II, which may have the unintended consequence of increasing the incidence of fraud in bank debit card programs, she added.
“The pain here will likely be felt broadly by banks and their customers, and will continue to trickle down to smaller institutions, including community banks, even if those banks are not directly subject to the interchange fee cap,” Bowman said. “The consequences for bank debit card programs, and the customers who rely on those programs, may be significant.”
Bowman also reiterated her concern about a broad range of regulatory proposals—from increased capital requirements to implementation of the Community Reinvestment Act—and the cumulative effects they could have on the banking industry. “In many ways, more can be counterproductive and harmful when it comes to regulatory reform,” she said. “When reforms are disproportionate to risk or fail to promote safety and soundness in an efficient way, those changes can harm the competitiveness of the U.S. banking system, impede the ability of banks to manage their risks, and even result in the allocation of capital by regulators instead of by bank management.”
