Testimony of Hugh Carney on Promoting the Health of the Banking Sector

Chairman Barr, Ranking Member Foster, and Members of the Subcommittee, thank you for the opportunity to testify at today's hearing entitled: "Promoting the Health of the Banking Sector: Reforming Resolution and Broadening Funding Access for Long-Term Resilience." My name is Hugh Carney, Executive Vice President at the American Bankers Association (ABA). The ABA is the voice of the nation's $25 trillion banking industry, which is composed of small, regional and large banks that together employ approximately 2.1 million people, safeguard $19.7 trillion in deposits and extend $13.1 trillion in loans.

My remarks will focus on four proposed changes to the existing regulatory regime that will make regulations more predictable, transparent, and risk-focused while preserving the vibrancy and competitiveness of the American banking system: (1) indexing regulatory thresholds; (2) modernizing the resolution framework; (3) updating funding statutes; and (4) recalibrating capital standards.

I. Indexing Regulatory Thresholds

For decades, many regulatory thresholds have stayed fixed in nominal terms, even as the economy has grown. These thresholds were typically set during very different economic conditions and have not been updated to reflect significant changes in the banking sector. As a result, thresholds that once reflected meaningful distinctions in size, complexity, or risk now capture institutions that were never intended to be subject to more burdensome regulatory requirements.

For example, heightened audit requirements established by the FDIC become applicable when a bank's assets reach $500 million, a threshold that was set in 1993. At that time, these more stringent requirements only applied to 7 percent of banks in the U.S. Today, this requirement applies to 41 percent of banks. Dozens of thresholds, from stress testing to resolution planning, have drifted the same way.

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