Bank CEOs testify before congressional financial services committees

On Sept. 21 and 22, the chief executives of the nation’s seven largest banks were questioned before Congress, marking the third time senior bank executives have testified before Congress in the past three years. The senators pointed out that only two were identical due to CEO changes and a decision to introduce super-regionals.

The first day of hearings took place before the parliamentary financial services committee. Committee Chair Maxine Waters (D-CA) delivered a keynote address titled “Holding Megabanks Accountable: Oversight of America’s Largest Consumer-Facing Banks,” which highlighted key audience topics. . “Our nation continues to grapple with an ongoing pandemic, inflation that affects every household budget, Russia’s invasion of Ukraine, rising interest rates and other crises that have plagued our economy. In this environment, the role that banks play in protecting consumers and providing access to affordable credit is absolutely essential. »

The bank’s panel acknowledged the seriousness of the problems facing the industry, with one panel member saying, “We are living in unprecedented times when history will judge the leaders of government and industry based on the measures we take to address health and economic crises and long-standing crises. structural inequalities.

Highlights from day one included:

  • Galloping inflation. Overall, bankers testified that consumers continue to be in good shape and spending is holding up well. When asked if they had confidence in the Fed’s determination to fight rising prices, there was unanimous approval.
  • War in Ukraine. Bankers testified that there was a possibility of a slight recession, which could worsen depending on how the war in Ukraine develops and noted that the war had also created uncertainty over energy and food supplies. .
  • Merchant code for firearms transactions. In reference to a new, separate merchant code for gun sales that several major credit card companies have said they will adopt, which some proponents say will make it easier to track potentially illegal gun sales. , testimony did not reveal any immediate plans to incorporate such code by the banking panel. When asked, all of the CEOs assured that they would not stop legal gun sales and that they would protect consumer privacy.
  • Climate change. Several bankers said their banks were already planning for climate-related risks, with one noting that data was not yet available to link such plans to capital requirements.

While the hearing focused primarily on challenges facing the banking industry, several House committee members thanked CEOs for their performance during the COVID-19 pandemic. “I want to thank our panel for their leadership during this pandemic. None of us expected this, and I just thank you for your leadership,” said committee member Ed Perlmutter (D-CO).

A transcript of day one testimony is available here.

The second day of hearings took place before the Senate Banking, Housing and Urban Affairs Committee and was billed as the “annual watchdog of the nation’s largest banks.” Chairman Sherrod Brown’s (D-OH) statement included a roadmap of steps he expected banks to take moving forward. “I expect you to take steps to make banking services work better for your customers and workers. Measures such as: eliminate excessive overdrafts and fees, reduce basic bank account costs, end forced arbitration, provide affordable home loans to all eligible borrowers in all communities. It means paying your workers – including the contractors who feed you, who clean your office, who provide security for your banks and offices – a living wage.

Ranking member Pat Toomey (R-PA) raised concerns in his opening statement about the growing trend of banks adopting an ESG agenda, making net-zero pledges and inserting themselves into highly charged social and political issues unrelated to their activity. “If the banks are relentless and refraining from influencing social and cultural issues, don’t be shocked if Republicans, once back in power nationally, seek to pressure the banks to advance their goals. ” Senator Toomey concluded by suggesting that if the banks do not stay away from highly charged social and political issues, they “risk being treated as public utilities – by both parties – in the future”.

In their opening remarks, each of the bank’s leaders detailed their recent efforts, achievements and commitments to their customers, employees and communities.

One of the main topics of the second day was peer-to-peer money transfer services. These apps have come under scrutiny due to the growing number of complaints from customers who unknowingly authorize payments to scammers and are unable to recover their funds. Credit card fraud and scams, on the other hand, are usually covered by credit card companies. Committee member Elizabeth Warren (D-MA) said, “You take advantage of every transaction on the system and tell people it’s safe. But when someone is defrauded, you pretend it’s the customer’s problem.

A member of the banking panel countered that when “a customer authorizes a transaction and it later turns out to be a scam, the banks should not be responsible for it”. This same panel member also assured the committee that scams only represent a very small percentage of transactions that take place on money transfer apps. Bank executives acknowledged some of the challenges of money transfer services, but also noted that peer-to-peer non-bank payment programs have far higher levels of fraud than those subject to banking regulations. .

While the two days of congressional testimony showed partisan drama, reality permeated and banks need to be aware of the messages conveyed by congressional leaders. These messages align with the oversight and enforcement activity that all banks see and experience at the federal and state level.

A transcript of testimony from day two is available here.

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