By Rob Nichols
Over the course of 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 that are 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. It is important that we preserve that diversity—but we must do so in a manner that ensures a level playing field between providers of financial services and protects all consumers equally.
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 top priorities for the industry in 2021.
This is not a new goal, but it remains important at this moment in time as we confront the challenges of modern life—from emerging technologies to a changing climate to recovering from a global pandemic.
Banks have always embraced innovation. Indeed, innovation has a vital role to play 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.
This means that a consistent set of regulatory standards must be applied to providers of financial services—be they 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 that apply to the nation’s banks.
A prime example of this is Figure Bank, which recently filed an application 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 field of membership restrictions—a move that even the agency’s former chairman blasted as “abandon[ing] rigorous and introspective analysis and its congressional mandate to stay clearly within the four corners of the Federal Credit Union Act.”
And, 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 being well-served by a broad and diverse financial services sector. In 2019, the share of unbanked U.S. households reached a record low of 5.4 percent, according to the FDIC, and banks are working to close that gap through the Bank On movement. With a fast-growing number of banks 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.
In order for us to be able 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 even faster pace—America’s banks can continue to their work to support an economic recovery that is robust and inclusive.
Rob Nichols is the president and CEO of the American Bankers Association, which represents banks of all sizes and charters and is the voice for the nation’s $20 trillion banking industry.