The American Bankers Association, along with 52 banking trade associations, sent a letter urging leaders at the Federal Reserve, Office of the Comptroller of the Currency and the FDIC to prioritize the indexing of supervisory asset thresholds.
“Inflation affects every corner of the American economy, from the price of consumer goods to the purchasing power of deposits,” the associations wrote. “Yet, many supervisory asset thresholds applicable to banks remain fixed in nominal terms, unchanged for years or even decades.”
Thresholds that once reflected meaningful distinctions in size, complexity or risk now capture institutions that were never intended to be subject to more burdensome regulatory requirements, the groups explained. “Indexing plays a crucial role in maintaining regulatory relevance, reducing unintended constraints on market participants and the public, and ensuring that rules remain appropriately calibrated as the economy grows,” they said.
Failure to index affects institutional behavior, strategic growth decisions and market structure, according to the trade groups. “Banks with limited complexity or risk profiles may be forced to shoulder costs and reporting burdens designed for much larger peers,” they wrote. “Institutions manage their balance sheets defensively to avoid crossing arbitrary thresholds. In some cases, this distortion discourages organic growth and instead encourages consolidation as the only viable means to absorb new regulatory burdens.”
There also are consequences for regulators, the association said. “An expanding pool of covered banks beyond the intended scope dilutes regulatory efforts and the ability of agencies to focus on the largest sources of risk,” the groups wrote. “These outcomes run counter to the policy objectives Congress and regulators have set.”
The letter urged regulatory agencies to “continue evaluating opportunities to use existing authority to index supervisory asset thresholds” and encouraged the agencies to work with Congress to identify where statutory changes are required to implement indexing so that standards do not “unintentionally drift over time.”
