ABA conference focuses on legislation, economic uncertainty and digital assets

This year’s American Bankers Association (ABA) conference was well-represented by banks across the nation that ranged in size from small family-owned community banks to large public institutions. The conference focused mainly on: (1) the November elections and the ABA’s efforts to influence candidates and current congressional members on pending legislation, (2) the unpredictability of the economy, and (3) education for banks on the emerging digital asset market and related tools to provide customers the opportunity to integrate their external digital asset relationship with their current institution.

Politics and pending legislation

The mid-term election cycle heating up gave ABA political strategists the opportunity to discuss pending and proposed legislation affecting banks. Several pieces of legislation are threatening to banks, including the “Durbin 2.0 Act” – a retailer-favored effort to remove the transactional fees associated with credit card transactions and thus remove credit card rewards for consumers. The original Durbin Amendment, passed in 2010 as part of the Dodd-Frank Act, began limiting the transaction fees charged to consumers using a debit card to an amount “reasonable and proportional” to the cost of the purchase.

Environmental, social and governmental (ESG) reporting requirements and limitations are also the subject of much pending legislation. Current bills circulating go as far as limiting the Securities and Exchange Commission (SEC) from any ESG oversight or enforcement on one extreme, to attempts to make ESG government policy decisions through industry lending relationship restrictions on the other. The ABA is working on influencing legislators to ensure that banks maintain autonomy in their lending decisions and to keep compliance costs related to ESG reporting to a manageable level. They fear that even application of fair or forced lending access restrictions to the largest banks in the U.S. will trickle to the smallest institutions eventually by way of “best practice” regulator creep.

The uncertain economy

Economic indicators and multiple Federal Reserve interest rate hikes, unheard of since the 1980s, are causing uncertainty in the lending and investment markets. Economists attending – including Comerica Bank’s Chief Economist Bill Adams – predict a slowing or halt to the interest rate increases in early to mid-2023. They discussed the Fed’s ability to “turn on a dime” if certain economic indicators turn negative, like if the unemployment rate increases. However, economic indicators are normally lagging, and the economy does not respond at the same pace as a Fed decision – creating an unpredictable future for banks.