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ABA Offers Congressional Testimony on Strength of Banking Industry

FirstBank CEO Jim Reuter appears on behalf of ABA members before House Financial Services Subcommittee on Financial Institutions and Monetary Policy

WASHINGTON —

The American Bankers Association today provided testimony to the House Financial Services Subcommittee on Financial Institutions and Monetary Policy on the banking industry’s public policy priorities, new initiatives to foster innovation and competition in financial services, and the key role that banks play in driving U.S. economic growth.

Jim Reuter, president and CEO of Denver-based FirstBank and a banker for more than 35 years, testified on behalf of ABA. FirstBank, with $27 billion in assets, 3,000 employees and more than 100 locations throughout Colorado, Arizona and California, is both deeply committed to the communities it serves and is widely recognized as an industry leader in innovation.

Reuter spotlighted several ways that banks of all sizes drive a healthy and inclusive economy, including successfully lowering the percentage of people without a bank account to its lowest recorded level of 4.5% in 2021 through initiatives such as low-cost Bank On-certified accounts. He also called on Congress and policymakers to support bank efforts to inject needed capital into rural and underserved communities, through legislation such as the New Markets Tax Credit Extension Act, the Affordable Housing Credit Improvement Act, and the soon to be introduced Access to Credit for our Rural Economy Act.

Noting the high compliance costs caused by regulatory unpredictability, Reuter's testimony also called on Congress to bring greater stability and balance to the CFPB by establishing a Senate-confirmed, bipartisan commission at the CFPB and to “limit the aggressive use of UDAAP authority, which creates uncertainty, discourages innovation, and raises compliance costs—particularly for community banks.”

Reuter praised legislation introduced by Rep. Andy Barr, the chair of the subcommittee, that would promote the formation of de novo banks, arguing that the bill “would unlock economic opportunity, growth, and investment in communities most in need, while also promoting competition.”

Reuter also remarked on the increasing competition and disruption within the financial services industry, which is often driven by technological innovation, and called for greater regulatory clarity and consistency.

“Many nonbank competitors have business models that rely on a kind of regulatory arbitrage in which they can offer one or several aspects of the banking bundle while avoiding the full banking regulatory framework. We see this clearly in the rise of payments charters or ‘special purpose’ charters at the federal or state-level that would aim to provide payments system access to companies that—because they do not hold insured deposits or do not lend—would not be subject to the same regulations as banks. They want to have the advantages of being a bank, but not be subjected to the Bank Holding Company Act. They want a seat at the dinner table but without having to eat their vegetables. History tells us that having participants in the same system subject to different oversight frameworks will end badly,” Reuter said.

He added that “policymakers can help maintain a nimble and competitive financial services sector by applying like-kind regulation to like-kind activity and by eliminating regulatory inefficiencies, which disproportionately affect small banks and contribute to banking services migrating outside the regulated industry.” This includes the areas of digital asset regulation, small business lending and Community Reinvestment Act compliance.

Reuter addressed proposed legislation to amend Title V of the Gramm-Leach-Bliley Act regarding financial data privacy, noting ABA’s support for its broader goals while expressing concern about potential changes to the Act’s enforcement structure. Specifically, he urged that enforcement authority not be given either to state attorneys general or through private rights of action, but instead remain limited to the prudential regulatory agencies.

Lastly, he highlighted how banks have led the way in digital innovation and cautioned against proposed government-run initiatives such as postal banking and a central bank digital currency.

“Government oversight of the financial services sector is critical to maintaining a safe and sound banking system, but direct government intervention in banking—whether through price controls, unevenly applied subsidies, or direct competition with private companies—distorts the financial services marketplace and can create unintended consequences,” Reuter said.

Read Reuter’s full testimony.

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About the American Bankers Association

The American Bankers Association is the voice of the nation’s $23.4 trillion banking industry, which is composed of small, regional and large banks that together employ approximately 2.1 million people, safeguard $18.6 trillion in deposits and extend $12.3 trillion in loans.

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