The American Bankers Association today submitted a lengthy list of recommendations for regulators on what they can do to promote meaningful choice in the core provider marketplace for community banks.
In a letter to the Federal Financial Institutions Examination Council’s Community Bank and Credit Union Digitalization Subcommittee, ABA shared information about the challenges community banks face with core providers. The letter follows a recent meeting between the ABA Core Platforms Committee and the FFIEC, where ABA discussed how core service providers affect community banks’ ability to digitalize and innovate.
“Community banks typically operate with limited in-house technical resources and are particularly dependent on their core processors,” the association said. “As a result, a core provider significantly impacts a community bank’s day-to-day operations as well as its ability to adapt to a rapidly evolving marketplace and technology landscape — both of which affect a bank’s business strategy.”
ABA said regulators could take several steps to promote competition and market transparency in the core provider market, such as by easing regulator pressure on community banks to contract with one of the top three or four providers, and by expanding the universe of providers subject to examination.
Among its other recommendations, ABA called on regulators to examine core provider readiness to support bank compliance with laws, regulations and industry standards; to enhance resilience testing and incident reporting requirements for providers; to encourage data access and application programming interface, or API, interoperability standards; and to incorporate potential risks from quantum computing into service provider examinations.
ABA also said that it will submit a separate comment letter responding to the Office of the Comptroller of the Currency’s recent request for information on community banks’ engagement with core service providers and other essential third-party service providers.
