Pub. 10 2015-2016 Issue 6

www.nebankers.org 8 Extraordinary Service for Extraordinary Members. Washington Update From Farm Credit to Fintech: The Case for Leveling the Playing Field Rob Nichols, President & CEO, American Bankers Association Email Rob Nichols at nichols@aba.com . © 2016 American Bankers Association. All rights reserved. Reprinted with permission. T HIS PAST DECEMBER, AFTER YEARS of waiting by bankers, mem- bers of the House Agriculture Committee finally brought in representatives from the Farm Credit Administration for the agency’s first oversight hearing inmore than a decade. It was a chance to ask some long-over- due questions about the Farm Credit System’s abuse of taxpayer benefits in financing such non-farm-related activi- ties as loans to telecom giants and chain restaurants. The hearing was held after repeated calls from ABA and the state associa- tions for more responsible management of a government-sponsored enterprise (GSE) that has far exceeded the intended scope of its mission for far too long. While we rightfully counted this hearing among our year-end victories, we also acknowledged that this is just one step in an ongoing battle to achieve a fair and level playing field for banks. It’s a battle that extends beyond the Farm Credit System (FCS) to other competitors that are getting a leg up from the government. The National Credit Union Administration (NCUA), for example, continues to confuse its role as regulator with that of a cheerleader. In recent months, it has approved a dramatic expansion of credit unions’ business lending powers and issued a wildly expansive membership proposal that, combined, make credit unions tax-exempt banks. The agency’s actions are nothing short of an end-run around Congress, where bankers have suc- ceeded in making credit unions’ legisla- tive wish list too controversial to touch. Other competitors may be getting a less visible but almost as powerful boost from regulators’ passivity, not activity. I’m referring to the fact that our regula- tory structure and rules have not kept pace with the rapid emergence of finan- cial technology products, or “fintech.” Fintech has dominated headlines in almost every major financial publi- cation in recent months as countless new payment, lending, and investment innovations have flooded the market, backed by billions of dollars of venture capital. It represents an area of great opportunity for us—already, we’re see- ing banks beginning to partner with these providers in new and innovative ways. But we must be mindful that the emergence of this new sector also comes with the potential for yet another unlevel playing field. As I noted in a recent American Banker op-ed, banks and fintech firms have different supervisory regimes, even though the products they offer—such as payments, loans, and deposits—are es- sentially the same. Banks are regularly examined to ensure consumer protec- tions and cyber defenses are in place, for example. Fintech firms are not. That has consequences not only for consumers but also for banks’ ability to partner with and match the innovations of fintech providers. These inequities are why creating a level playing field is the first pillar of ABA’s Agenda for America’s Hometown Banks (available at aba.com/agenda) . We are advocating for prudent and responsible oversight for fintech com- panies, not simply because it impacts our bottom line, but because it impacts our customers. We are also pursuing the elimination of the special tax status for the Farm Credit System and credit unions when they act outside their mis- sions. These are big asks, and progress towards these goals will require tre- mendous patience and persistence. But we saw our persistence pay off with the Farm Credit System hearing in Decem- ber—a small yet crucial first step. And we hope our steady drumbeat about our tax-advantaged competitors will pay off whenever Congress turns its attention to tax reform. 