American Bankers Association (ABA) executive Hugh Carney testified this week before the House Financial Services Subcommittee on Financial Institutions during a hearing on the banking industry.
Specifically, the hearing was titled “Promoting the Health of the Banking Sector: Reforming Resolution and Broadening Funding Access for Long-Term Resilience.” Carney, executive vice president for financial institutions policy and regulatory affairs at ABA, outlined four key policy recommendations aimed at making financial regulations “more predictable, transparent, and risk focused.
The four recommendations are:
- Indexing Regulatory Thresholds: Carney emphasized the need to modernize outdated asset-based thresholds, noting that “indexing is a low-cost, high-impact reform that improves transparency, reduces arbitrary burden, and allows regulators to focus where the risk really is.” He cited the FDIC’s $500 million audit threshold, set in 1993, which now applies to 41 percent of banks—up from just 7 percent when it was introduced.
- Modernizing the Bank Resolution Framework: Carney called for reforms to the FDIC’s resolution process, including broadening the least-cost test, enabling greater community bank participation, and improving transparency in bidding. “ABA emphasizes that failed bank resolutions implicate multiple policy goals and multiple economic and community interests,” he said. “We urge Congress and the FDIC to work toward a framework flexible enough to take appropriate account of those goals and interests that go beyond resolution costs alone.”
- Ensuring Access to Stable Funding: Carney noted “it is critical that banks have access to stable funding sources and that statute, regulations and supervision related to funding and liquidity are aligned with modern banking, the marketplace for financial services, and reflect actual risk and risk management practices.” He urged Congress to repeal Section 29 of the Federal Deposit Insurance Act, arguing that the statute, enacted in 1989, is outdated and misaligned with modern banking and technology.
- Recalibrating Capital Standards: Carney warned that mis-calibrated capital rules “can raise borrowing costs, reduce credit availability, and restrict liquidity in the economy.” He advocated for a capital-neutral approach and a holistic review of leverage ratios, including finalizing the proposed changes to the Enhanced Supplementary Leverage Ratio.
Carney said that these four proposed changes “will make the financial system safer, more competitive, and better equipped to serve customers and communities.”