The House Subcommittee on Financial Institutions and Monetary Policy, part of the Financial Services Committee, will discuss banking and the need to improve the regulatory environment in light of emerging technology.
The hearing, Revamping and Revitalizing Banking in the 21st Century, will review ways regulation can change to boost mainstream access to financial services, address issues of the underbanked.
The rise of neobanks – Fintechs that provide banking services by partnering with chartered banks – as well as digital banks which hold federal charters, may be able to offer sophisticated services to the masses at a far lower cost.
The witnesses for the hearing include:
- Jim Reuter, Chief Executive Officer, FirstBank, on behalf of the American Bankers Association
- Penny Lee, Chief Executive Officer, Financial Technology Association
- John Berlau, Senior Fellow and Director of Finance Policy, Competitive Enterprise Institute
- Brian Knight, Senior Research Fellow, Director of Innovation and Governance, Mercatus Center at George Mason University
The hearing memo states:
“Increasing access to mainstream financial services, consumer credit for households, and commercial credit for small businesses is best accomplished by increasing competition between financial firms and addressing obstacles to forming de novo banks. Updating financial regulations to match Americans’ needs and the technological era we live in is imperative to increasing financial access, fostering growth, and creating opportunity for all Americans.”
The hearing will take place at 10 AM ET on Wednesday, February 8, 2023, and will be live-streamed on the Committee’s website.
Pending legislation associated with the hearing is listed below.
H.R. , the Financial Data Privacy Bill
This bill amends the Gramm-Leach-Bliley Act to include a number of additional consumer protections, including (i) empowering consumers to understand how their data is being collected and used by service providers, (ii) giving consumers the right to terminate the collection or their data, including requesting of deletion of data records at any time, (iii) requirements for covered entities to disclose the types and uses for data being collected, along with an opt-out function, (iv) mandating more transparent and easily understandable privacy terms and conditions, and (v) providing for national preemption to generate a single national standard.
H.R. , the Promoting Access to Capital in Underbanked Communities Act
This bill seeks to increase de novo bank formations through a reduction in burdensome initial capital requirements and restrictions. Specifically, the bill would provide for a 3-year phase-in period for de novo financial institutions to meet federal capital requirements, lower the Community Bank Leverage Ratio (CBLR) for rural community banks to 8 percent from 8.5 percent during the first three years of operations, and require the federal banking agencies to promulgate rules setting the CBLR lower for the first two years of operations to allow for a phase-in period. The bill additionally removes some restrictions to allow federal savings associations to deal in agricultural loans and requires the federal banking agencies to conduct a joint study on trends in de novo financial institutions.
H.R. , the Bank Service Company Examination Coordination Act
This bill requires the coordination of state banking agencies and federal banking agencies in regulating and examining the activities of bank service companies. This bill allows for the sharing of information related to examinations and regulations between federal and state agencies and additionally, requires that state and federal agencies coordinate and avoid duplicative examination activities, reporting requirements, and requests for information.
H.R. , the Promoting New and Diverse Depository Institutions Act 2
This bill directs the federal banking agencies to conduct a study regarding the barriers to entry that de novo depository institutions face, and subsequently requires a strategic plan to be generated by the agencies, based on the findings of the study, which provides for the promotion of de novo applicants. Specifically, the strategic plan is intended to focus on the promotion of minority depository institutions, entities that could be certified as community development financial institutions, and depository institutions in underserved communities.
H.R. , the Financial Stability Oversight Council Improvement Act
This bill prevents the Financial Stability Oversight Council (FSOC) from voting to determine that a nonbank financial company will be supervised by the Board of Governors of the Federal Reserve System without first considering alternatives. Specifically, the FSOC must determine, in consultation with the company in question and the company’s primary financial regulator, that heightened standards and safeguards, or a separate written plan submitted to the FSOC, is insufficient to mitigate the threat posed by the company to U.S. financial stability.