WASHINGTON — The coronavirus pandemic catapulted banks to the forefront of economic relief efforts, and the industry's success in facilitating financial support for consumers and small businesses has made 2020 in some ways a banner year for banking.
But the hardest work may be yet to come, says the chair of the Consumer Bankers Association.
“We know the Biden administration has said they're expecting a dark winter,” said Christine Channels, the head of community banking and client protection at Bank of America, who took the reins of the CBA board in October. “There's a lot of positive news around the vaccines — and certainly, we're excited about that — but we know that people need access to more money. We know that small businesses are needing access to this money.”
In a wide-ranging interview, Channels touted the performance of CBA members in delivering aid to small businesses through the Paycheck Protection Program. Thirteen of the 15 top PPP lenders are part of the trade organization, including BofA.
“It's been a very tumultuous year for all of us, but we're really proud of the way the banks’ response has been here to help not just our consumers, but the overall country.”
Although the deadline has passed for the Small Business Administration to approve new PPP loans, some small-business advocates in Congress want to authorize another round of PPP in a future stimulus package.
And many in the industry want policymakers to take further steps to simplify the process for small-business borrowers requesting loan forgiveness in the PPP. Channels said bankers hope President-elect Joe Biden's administration will focus on PPP forgiveness after taking office in January.
"If the Biden administration were to adjust the forgiveness process for those small businesses, it would make a significant impact," she said. "The CBA has been advocating that for businesses with $150,000 or less in loans, that they simplify that process for those small businesses so that it’s not a burden on them."
Weighing in on the banking policy environment, Channels said the industry is committed to modernizing the Community Reinvestment Act but is urging regulators to develop a consistent CRA reform framework across all agencies.
She also expressed hope that regulators will be cautious about approving bank charters for fintech firms whose investment in their compliance programs do not equal that of banks.
“We’ve got a lot of innovation happening among new fintechs and other companies coming forward, and banks are evolving and innovating,” Channels said. “And I think it’s important that the rules by which we operate, the oversight that we have, continues to be strong.”
“It’s important that we don’t lose that as a whole if we’re bringing in new businesses like fintech that aren’t investing in those same practices and don’t have that same level of oversight,” Channels added, “so that at the end of the day, the consumer is the one that is protected and can trust in a strong system.”
The following is from a conversation with Channels that has been edited for length and clarity.
You are the CBA's incoming chair at a rocky time for the economy. What is the most important thing that the Biden administration can bring to the financial system in the months ahead?
CHRISTINE CHANNELS: We've seen our banks come together through the CBA and talk about the best ways possible to help our clients be financially stable during this crisis, to make sure we've got the right safety and health care protocols so that we can serve clients. We know the Biden administration has said they're expecting a dark winter. There's a lot of positive news around the vaccines — and certainly, we're excited about that — but we know that people need access to more money. We know that small businesses are needing access to this money.
Looking at [Paycheck Protection Program] forgiveness, we've had hundreds of thousands of small businesses receive money through that process. And if the Biden administration were to adjust the forgiveness process for those small businesses, it would make a significant impact. The CBA has been advocating that for businesses with $150,000 or less in loans, that they simplify that process for those small businesses so that it’s not a burden on them. It would equate to about $7 billion in assistance as well as [fewer] hours ... of paperwork and complexity.
The Trump administration has advanced significant financial policies over the past four years, from modifying post-crisis capital and liquity rules to modernizing the Community Reinvestment Act. There seems to be a focus among some Democrats on undoing those policies. What specific policies should the Biden administration preserve, at least in part?
We really need to modernize the CRA. I’d start by saying that CBA believes very strongly that banks have an affirmative obligation to help meet the credit needs of all communities, especially our low- and moderate-income areas. We believe in safe and sound banking policies. Our member banks have supported the CRA’s objectives to ensure that our LMI communities’ credit needs are being heard. And we're committed to ensuring that resources are invested through approved CRA activity. But modernizing the CRA to reflect the digital evolution of banking, and ensuring more certainty and clarity throughout the CRA process, is a top priority for our CBA membership. We have seen progress with the [Office of the Comptroller of the Currency], and there’s
We want to see those goals shared by the [Federal Deposit Insurance Corp. and Federal Reserve Board]. We believe there should be as much consistency as possible across the CRA regime, and the final rules should make the CRA process more objective and transparent, as well as consider modern banking practices and the needs of a modern community.
There is daylight between different regulators' approaches to reforming CRA. Would CBA members be open to the OCC rule being replaced by a reform framework resembling the Federal Reserve's plan, or prefer that what the OCC already put in place be preserved?
The key thing I’d go back to is, there needs to be consistency between all these regulatory agencies and the way they look at the CRA. It's really important here to have an objective and transparent process related to CRA that is consistent across agencies.
Is there anything the Trump administration has done on a policy level that the CBA would like to see undone? I know the CBA signed a letter a little while ago
We feel very strongly there needs to be consistency in the financial industry, and that fintechs and others need very similar rules and oversight. In 2018, when the OCC announced they would be accepting applications for national bank charters from fintech companies engaged in the business of banking, the OCC efforts to produce those fintech charters were
The issues being considered here have pretty large implications for our banking system and our policy determination. The CBA has openly opposed the OCC’s effort to grant a commercial company, or a fintech, their charter to access the federal national bank safety net. We’re concerned that would avoid oversight and regulations that protect not just the financial system, but especially the customers and consumers who could be harmed by this.
The CBA has focused on leveling the regulatory playing field between banks and nonbanks. Is the playing field level, or should the Biden administration focus on leveling it more?
I think we need to continue to improve in that area, because at the end of the day, this is about consumer protection. We’ve got a lot of innovation happening among new fintechs and other companies coming forward, and banks are evolving and innovating. And I think it’s important that the rules by which we operate, the oversight that we have, continues to be strong. We’ve seen it in the banking sector, and that’s similar to the reason we’ve been able to be successful this year as an industry — it’s the 10 years of really strong regulation, oversight and the good foundations built by the banking industry. It’s important that we don’t lose that as a whole if we’re bringing in new businesses like fintech that aren’t investing in those same practices and don’t have that same level of oversight so that at the end of the day, the consumer is the one that is protected and can trust in a strong system.
There is some speculation that under the Biden administration, banks' balance sheets would be evaluated against
Our banks are doing economic and risk-based assessments on every aspect of their portfolio. Certainly, you’re looking at climate change when you’re thinking about mortgages, and you’re looking at areas where sea levels are rising. I wouldn’t say this is something not already on the radar. We have not seen, at this time, a proposal on how regulators would operationalize any of these requirements related to climate change or how they would define those risks. So obviously, you’d want to start there and start to understand how that would be defined and what people would be looking at.
The CBA criticized the Consumer Financial Protection Bureau during the Obama years, but many expect the agency will have a similarly aggressive posture under Biden. How can CFPB achieve balance in its supervisory approach?
With the CFPB, we’re looking for fairness. We know that at the heart of it, it is about protection for our consumers. There have been a lot of really great rules that have been put in place by the CFPB. But at the end of the day, when we look across the regulatory landscape, what’s really important is consistency in the way we interpret the law. … [The CBA would also like] some coordination. When you look at exam activity in the banks, and — pick the topic of the day that the industry is focused on — when it’s time to come in for an exam, you’ll find there is a lot of overlap and a lot of different points of view coming in on the same topic. It would be ideal — if I were to design how we operate in 2021 — if there were more coordination across all the agencies, more sharing of information across those agencies, and a consistent approach as they come in to do exams and oversight.
