Pub. 10 2020-2021 Issue 6


A Robust Recovery Requires Consistent “Rules of the Road”

Throughout the pandemic, the U.S. economy has been tested like never before and has more than proven its resilience. That’s thanks in no small part to our large and diverse financial system: a network of financial institutions of all sizes, charters and business models dedicated to providing the products and services that consumers and businesses need to thrive.

The diversity of our financial system is something that is uniquely American. We must preserve that diversity — but we must do so in a manner that protects all consumers equally and ensures a level playing field between providers of financial services.

In ABA’s recently released Blueprint for Growth, a banker-driven document that will serve as our advocacy north star in the year ahead, we identified the need to promote innovation and ensure consistent regulation as one of the industry’s top priorities in 2021.

This plan is not new, but it remains important as we confront modern life challenges — from emerging technologies to a changing climate to recovering from a global pandemic.

Banks have always embraced innovation. Indeed, innovation has a vital role in increasing economic competitiveness, promoting financial inclusion and expanding access to banking services. But financial innovation only provides these benefits when undertaken in a safe, responsible manner.

A consistent set of regulatory standards must be applied to financial services providers, including credit unions, banks or fintech firms. Unfortunately, we’ve seen several instances in recent months of firms attempting to circumvent these regulatory standards by seeking charters that would allow them to access the banking system without being subject to the same rigorous regulatory standards applicable to the nation’s banks.

A prime example of this is Figure Bank, which recently applied for a national banking charter through the OCC that, among other things, would allow it to operate without deposit insurance. If approved, this charter would enable Figure Bank to apply for membership in the Federal Reserve system while avoiding compliance with regulations like the Community Reinvestment Act.

We’ll continue to oppose the approval of charters like these, and we’ll continue to push back against any efforts that would enable new entrants into the financial services marketplace to cherry-pick which rules of the road apply to them.

We’ll also continue our efforts to advocate against further tilting the field for tax-advantaged entities like credit unions and the Farm Credit System. For example, we are pushing strongly against a recent National Credit Union Administration effort to further loosen the field of membership restrictions. Even the agency’s former chair blasted the move as “abandon[ing] rigorous and introspective analysis and its congressional mandate to stay clearly within the four corners of the Federal Credit Union Act.”

Should policymakers accelerate attempts to push the Federal Reserve or the U.S. Postal Service into retail banking, we’ll continue making the case that this kind of involvement is unnecessary because consumers are already well-served by a broad and diverse financial services sector. According to the FDIC, the share of unbanked U.S. households in 2019 reached a record low of 5.4%. Banks are working to close that gap further through the Bank On movement, and a fast-growing number of banks have signed on. Bank On certified accounts are now offered in 28,000 branches nationwide, in 99 out of the 100 largest metropolitan markets and in all 50 states.

For us to convey this message, however, we must ensure that community banks have the capacity and ability to keep innovating. That’s why we’ve been working diligently through ABA’s Core Platforms Committee to smooth over some of the bumps in the road that have historically held banks back from rolling out new digital products and services that their customers want and that they need to remain competitive.

By supporting the digital transition — an effort that was well underway before the pandemic but is now accelerating at an even faster pace — America’s banks can continue their work to support an economic recovery that is robust and inclusive.