ABA Calls for Comprehensive Regulatory Relief

On Banking Operations.

• Regulation II (Debit Card Interchange Fees and Routing).
  • The ABA urged the Board to rescind the 2022 card-not-present enablement rule, stating it exceeds statutory authority and stifles competition.
  • The ABA recommended narrowing the "net compensation" provisions to align strictly with the Durbin Amendment’s transaction-based scope rather than all "debit card-related activities."
• Regulation CC (Availability of Funds and Collection of Checks).
  • The ABA advised technical updates to remove obsolete "nonlocal check" references and update the "business day" definition to include Juneteenth or cross-reference the federal holiday schedule.
  • The ABA also urged enhancements to fraud mitigation by: (i) expanding "reasonable cause" holds based on internal fraud detection, (ii) creating a distinct fraud exception hold, (iii) extending the "new account" period to 120 days, and (iv) maintaining current check-deposit hold times to support effective fraud prevention.

On Capital and Prudential Regulation.

• Leverage Ratio. The ABA recommended restoring leverage ratios to a backstop role by excluding reserves, cash, and U.S. Treasuries from the calculation and reducing the community bank leverage ratio to 8%.
• Stress Testing. The ABA urged greater transparency of supervisory models by recalibrating the Global Market Shock and Large Counterparty Default components and better aligning pre-provision net revenue and loan-loss models with market realities.
• Long-Term Debt (LTD). The ABA suggested eliminating the separate LTD requirement for G-SIBs and urged rescinding the 2023 LTD proposal for other large banks.
• Basel III Endgame. The ABA asked the agencies to develop a new, more holistic proposal that is "roughly capital neutral" and removes excessive gold-plating from the 2023 proposal.
• U.S. Standardized Requirements (Regulation Q). The ABA proposed several adjustments, including: (i) retaining higher capital deduction thresholds; (ii) recognizing netting for repo-style transactions; (iii) aligning mortgage and corporate risk weights with international standards; and (iv) refining the Standardized Approach for Counterparty Credit Risk (SA-CCR).
• G-SIB Framework. The ABA recommended (i) indexing the fixed coefficients to nominal GDP; (ii) reducing the weight of the short-term wholesale funding indicator; and (iii) removing multiple counting of derivatives and repos across different score components.
• Digital Assets. The ABA called for a technology-neutral capital treatment for digital assets that reflects actual risk and avoids punitive treatment based solely on accounting classification.

On the Community Reinvestment Act ("CRA"). 

• Framework. The ABA supported rescinding the 2023 Final Rule and recommended reinstating the 1995 framework with targeted improvements.
• Performance Tests. The ABA encouraged increasing the asset-size thresholds for the Small and Intermediate Small Bank tests and recommended indexing them to nominal GDP.
• Community Development ("CD"). The ABA recommended (i) expanding CRA credit for activities such as financing naturally occurring affordable housing, pro-rata credit for mixed-purpose initiatives, outstanding balances on prior-period CD loans, and financial literacy programs for all income levels; (ii) granting CRA credit for partnerships with certified CDFIs regardless of geographic location; and (iii) establishing a pre-clearance process and/or maintaining a public list of CRA-qualifying activities.
• Process Issues. The ABA urged the agencies to (i) address inconsistencies in examiner guidance, (ii) improve transparency in how "performance context" is applied, and (iii) modernize the public file requirements to better reflect digital practices.

On Indexing Asset Thresholds.

• The ABA recommended that the agencies adjust and automatically index all asset-based regulatory thresholds to nominal GDP to prevent "regulatory 'drift,'" where inflation and economic growth unintentionally subject more banks to heightened standards and establish transition periods to avoid "cliff effects" when banks cross those thresholds.