Financial inclusion promoted at ABA Summit

Sen. Sherrod Brown (D-Ohio) asked bankers to keep “an open mind” as he refocuses the attention of the Senate Banking Committee on housing and urban affairs in addition to its traditional focus on banking. “This committee for too long has been all about Wall Street banks,” said the committee’s chair. “This means you all won’t like everything we do. It’s not personal. It’s about approaching the economy in a different way.” 

That difference is an earnest focus on financial inclusion, a central theme for the American Bankers Associations’ 2021 Washington Summit, held March 16 and 17, which featured Sen. Brown, a keynote from FDIC chair Jelena McWilliams, counterpoint commentary from Senate Banking Committee Ranking Member Pat Toomey (R-Pa.), and comments from others.

People don’t trust banks, Sen. Brown said, especially not big banks. “People feel like they’ve been burned over and over again by fees, by minimum balances, by waiting periods, by segregated second chance accounts…then they turn to check cashers, payday lenders and predatory fintechs… . Stop doing things to hurt your customers and start doing things to help them,” he preached.

Sen. Brown leveled his criticism mostly at large banks, the ones shuttering branches in rural communities, and admitted that community-based financial institutions have stepped up to help people through small-dollar loans and the Paycheck Protection Program. “We need more community banks, not less, in peoples’ neighborhoods,” he said, giving a nod to his plan to create FedAccounts — no-fee accounts “available to every American at a post office or a small bank or credit union, backed by the Federal Reserve.”

Sen. Toomey called the plan to use the federal government, and the post office, to create a bank “laughable.” He pointed instead to the Bank On Certified Accounts as an appropriate response to a lack of financial inclusion. These accounts “are a way for the industry to serve this market instead of government,” Sen. Toomey said.

Bank On Certified Accounts create national standards for affordability and inclusion which include low- or no-cost accounts, no overdraft fees, transaction capabilities and online bill pay. The ABA supports and promotes Bank On Certified Accounts and encourages banks to sign on. Some 70 banks already have.

It is estimated that 7 million Americans do not have a banking relationship. People in need of immediate access to stimulus funds who do not have a bank account are scrambling. For bankers focusing on financial inclusion, it could be an opportunity to establish or strengthen efforts to reach the unbanked — who are more likely to be people of color — especially with a round of child tax credits coming in summer. 

The two Senators also delivered opposing assessments of the latest round of stimulus passed by the Biden Administration. Sen. Brown praised the plan, saying leading economists agreed it was necessary, while Sen. Toomey said in the wake of earlier, needed stimulus, the American Rescue Plan was not. 

McWilliams commended banks for their resiliency during the pandemic. “Banks reacted early and increased their loan loss reserves” as the unemployment rate spiked to 15 percent and GDP dropped 33 percent on an annualized basis,” she said. “I really appreciate how bank management worked proactively with borrowers to keep businesses afloat.”

McWilliams, too, encouraged banks to consider low-cost account offerings. “We know there are still millions of Americans without a bank account,” she said. Bank On accounts are “popular not only with unbanked customers, but also for millennials and others who want a simple account,” she said.

The CARES Act, passed a year ago, included a provision to reduce the Community Bank Leverage Ratio to 8 percent, temporarily. The CBLR is set to transition back to 9 percent on Jan. 1, 2022, and McWilliams said no decision has been made on whether the lowered CBLR would be extended. “The CBLR framework provides a grace period in which a bank that does not meet the eligibility criteria including the CBLR requirement could continue to use the framework for up to two quarters,” she said.  

The leverage ratios overall ensure “that CBLR remains consistent with our objectives but also that banks are not punished for taking into account the deposits coming into the system and trying to ensure they are the conduit for their customers and their communities,” McWilliams said.

Cedric Richmond, senior advisor to President Biden, and director of the White House Office of Public Engagement, also spoke at the Summit, asked bankers to encourage their staff to get themselves and their loved ones vaccinated against COVID-19.