Washington, D.C. — Greg Baer, President and CEO of the Bank Policy Institute, issued the following statement in reaction to a statement by two members of the Federal Deposit Insurance Corporation’s board of directors:
Yesterday CFPB Director Chopra and FDIC board member Gruenberg attempted to advance an FDIC proposal through an unprecedented and irregular procedure. Leaving aside the process that produced it, the substance of their joint statement is deeply troubling. It seeks to establish serious and perhaps insurmountable obstacles to consolidation in an industry where market forces and good public policy are demanding it.
Currently, the U.S. banking system is across all product lines the most competitive in the world. It is also one of the least concentrated industries in the United States. We have thousands of banks in this country, large and small. But now the high costs from moving to digital finance, protecting systems from cyber intrusion and ever-increasing regulatory and examination compliance demands are reinforcing the extent to which banking is a scale business. And achieving scale often requires combining through mergers or acquisitions, particularly for mid-sized and regional banks.
The statement by the CFPB director and FDIC board member charts a course where banks would be denied the opportunity to compete with FinTechs that are in many cases much larger and hold higher market share, and which enjoy reduced operating costs given their immunity from the examination process and liquidity and capital regimes visited on banks. Even as other policymakers rightfully raise a host of consumer protection and financial stability concerns about the FinTechs, this statement sets out a path that would enfeeble the banking industry in its efforts to compete.
Finally, the statement fails to note that the events of 2020 provided a real-world stress test of the existing regulatory and resolution regime, which U.S. banks passed with flying colors. Not only did larger U.S. banks prove themselves resilient but also markets priced their debt on the assumption that there would be no governmental support for it. This result should be a point of particular pride for FDIC staff, and it is a shame that two of their board members worked so hard to ignore it.
About Bank Policy Institute.
The Bank Policy Institute (BPI) is a nonpartisan public policy, research and advocacy group, representing the nation’s leading banks and their customers. Our members include universal banks, regional banks and the major foreign banks doing business in the United States. Collectively, they employ almost 2 million Americans, make nearly half of the nation’s small business loans, and are an engine for financial innovation and economic growth.