Happy new year to you and your families! I hope each of you had a wonderful time celebrating the holiday season. I welcome each new year with hope and optimism as we face challenges with renewed energy.
Economic Outlook
2023 greets the banking industry with economic uncertainty. Prices are high, but consumer spending is up. Inflation may be easing, but the Federal Reserve is still raising rates. The unemployment rate has settled, but the search for good talent in the workplace remains. If you feel uncertain about the current economic outlook, you are not alone. Experts anticipate that inflation is likely to remain somewhat elevated through the end of this year. While consumer and business balance sheets are strong, it remains to be seen whether inflation will begin to chip away at financial reserves. Either way, FDIC reports show that the banking sector is in a position of strength coming out of 2022, and financial institutions remain well-equipped to weather potential economic headwinds amid elevated inflation, continuing Fed rate hikes, and geopolitical uncertainty.
Regulatory Outlook
The regulatory landscape presents both new and existing issues to monitor.
There has been a lot of discussion regarding Overdraft and Non-Sufficient Funds (NSF) fees. While many financial institutions are changing their consumer policies surrounding overdraft fees, the clearest move for banks is to ensure transparency. Even with a strong policy and transparency, you may be unable to avoid UDAAP violations.
Cryptocurrency has received much attention in the media due to the collapse of FTX. CBA and the ABA support the Financial Stability Board in establishing a proposed framework for the international regulation of crypto asset activities and are working to help banks safely meet customer demand for digital assets while minimizing any risk novel assets present to consumers or our economy.
The current issues surrounding climate change bring a new perspective to banks regarding Environmental, Social, and Governance (ESG) regulations. CBA recognizes the growing concerns from policymakers, investors, customers and others around climate change, including the impact on banks and the communities they serve from efforts to address climate-related financial risks. While there is debate over the role banks can and should play in responding to climate-related financial risk, CBA believes common-sense, market-based solutions offer the best opportunity for addressing this issue.
The Credit Card Competition Act was introduced in the Senate by Dick Durbin (D-Ill.) and Roger Marshall (R-Kan.) and in the House by Peter Welch (D-Vt.) and Lance Gooden (R-Texas). It would create new credit card routing mandates that could affect banks of all sizes that issue credit cards. CBA, along with 50 other state banking and financial services associations, signed onto a letter organized by the ABA that urges lawmakers that the misguided Marshall-Durbin proposal will lead to fewer options for consumers, greater threats to consumer data and privacy, weakened community banks and credit unions and the disappearance of card rewards programs that families of all income levels use to stretch their budgets while also transferring wealth to a handful of high-volume, highly profitable large merchants. Bankers must pressure lawmakers to keep the Credit Card Competition Act out of must-pass legislation.
Legislative Outlook
Colorado Democrats will be entering the 2023 Legislative Session with an unprecedented majority in both chambers with a veto-proof 46-19 majority in the House, a margin of the likes no party has maintained in this century. The previous legislature made compromises to pass some regulatory bills over the past four years, but the environment may be changing. While this new environment may present a new challenge, CBA welcomes this and will continue to do what we have always done – focus on building relationships and lobbying for sound, common-sense solutions. We will greet our new legislators with excitement and strive to educate them on the good work banks perform each day for customers and communities in Colorado.
Over the past few years, we have learned that we are nimble and can adapt quickly. We persevered through the rollercoaster of the pandemic. We will survive the ups and downs of the economic and regulatory landscape in 2023. The coming year will be crucial for the financial services industry. We are in a strong position with CBA representing our industry, strengthening relationships locally and nationally.
