Vol. 108 2024 Issue 2 (Mar/Apr)

Against a Rising Tide of Regulation, Banks Must Row Together


The sobering reality for banks right now is that rougher seas are likely ahead, but our best hope is to row together.

Whenever a new election cycle comes along, it’s not uncommon to hear pundits make mention of “red waves” or “blue waves,” denoting potential power swings in Congress. But as bankers contemplate the future of our country and the policy environment that will shape the future of our industry, there’s another wave that we need to talk about: a tsunami of complex regulation that’s hitting the banking sector as we speak.

To be sure, the tide turned quickly: Last year’s turbulent spring ignited a rulemaking frenzy at the banking agencies. Suddenly, new proposals sprang up to increase bank capital levels, impose a new long-term debt requirement and make the resolution planning process more complex.

Simultaneously, the Consumer Financial Protection Bureau imposed long-awaited small business reporting requirements under Section 1071 of the Dodd-Frank Act that went far above what was outlined in the statute. The Federal Reserve issued a proposal to cap interchange fees under Regulation II, and the Federal Deposit Insurance Corporation is now pursuing significant changes to its corporate governance guidelines.

Against all that, the agencies finalized a long-awaited update to the Community Reinvestment Act framework — a staggeringly complex, 1,500-page final rule that creates significant new requirements that have the potential to fundamentally alter banks’ business strategies.

Meanwhile in Congress, banks face the resurgent threat of the so-called “Credit Card Competition Act,” which would apply Durbin Amendment-like provisions to credit cards — the equivalent of lawmakers taking money from banks and putting it into the cash registers of mega-retailers.

Taken together, these policies place a tremendous cost and compliance burden on banks of all sizes at a time when they already face a tough operating environment due to a protracted period of high interest rates and ongoing geopolitical tensions.

These policies will also have devastating effects for consumers. Banking is, after all, a business. For banks to offer the full range of financial products and services to meet the needs of communities, they need to be profitable and have an operating environment that supports growth.

The current regulatory landscape will do the opposite. Banks that are already considered well-capitalized by regulators’ own admission will be forced to hold even more capital in reserve, which means less capital will be available to lend to the local small business looking to expand or to the young family looking to buy their first home. Simultaneously, changes to the fee income streams upon which banks have long depended could spell the end of free or low-cost checking products and popular rewards programs that consumers value.

What’s perhaps most concerning, however, is the fact that regulators don’t seem to understand the full impact of their actions. As we observed with the Reg II rulemaking and the so-called “Basel III endgame” proposal, regulators are failing to adequately assess the potential costs of the individual regulations on banks and consumers, let alone contemplate what the cumulative impact of all these rules would be.

ABA is sounding the alarm. We need to make sure policymakers in Washington — from members of the administration to lawmakers in Congress and regulators holding the rule-writing pens — understand that regulatory burden has a real-world cost, not just for banks but for consumers, small businesses and the American economy.

If you’re reading this, I urge you to help us tell that story. Join our Bank Ambassador program to rekindle relationships with your congressional delegation and help educate policymakers about banking. Stay informed and send a letter about an issue that will affect your bank through ABA’s grassroots platform,

The sobering reality for banks right now is that rougher seas are likely ahead, but our best hope is to row together.

Rob Nichols has been president and CEO of the American Bankers Association since 2015 after 10 years at the helm of the Financial Services Forum, a nonpartisan economic policy and advocacy organization. He also served in the George W. Bush administration as assistant secretary for public affairs at the Treasury Department.

Email Rob at

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