Today, ABA joined 52 state bankers associations from across the country in filing a joint comment letteron the FDIC’s proposal to begin indexing certain regulatory thresholds, applauding the FDIC’s effort to develop a sound and transparent framework while recommending methodological changes to ensure that indexing mechanisms are appropriately tailored to the nature and purpose of each threshold.
“Static thresholds create a host of unintended consequences,” the associations write. “Over time, economic growth and inflation erode the real value of these thresholds, pulling more institutions into regulatory regimes that were never intended to apply to them. This results in a misallocation of supervisory resources, unnecessary compliance costs, and distorted business planning. Community banks, in particular, face recruitment and operational challenges in meeting requirements that were designed for much larger institutions.”
The letter continues, “Indexing offers a solution. By ensuring that thresholds evolve with economic growth, indexing preserves the original intent of regulatory frameworks while reducing the need for constant intervention. It enhances transparency, supports long-term planning, and ensures regulatory requirements remain aligned with actual risk. In short, indexing will make oversight smarter, more sustainable, and more credible.”
While commending the FDIC proposal as an “important step toward aligning regulatory coverage with real-world conditions,” the letter makes the case that indexing asset- and activity-based thresholds to nominal gross domestic product, rather than to inflation, would better preserve the original intent of these thresholds. The letter adds that the use of a price index for consumer-facing dollar-based thresholds would remain appropriate.
The letter further urges the FDIC to consider the base effects of the initial adjustment of thresholds and to adopt a transition mechanism to smooth the impact on banks that cross regulatory thresholds. It also encourages the FDIC to coordinate with the other federal banking regulators and Congress on broader indexing efforts to pursue a harmonized and cohesive approach to indexing.
The letter concludes: “We thank the FDIC for its leadership in proposing this long-overdue modernization of regulatory thresholds. The proposal represents a critical first step toward a more rational and durable regulatory framework. We are encouraged by the growing recognition among policymakers, including Acting Chairman Hill and Vice Chair Bowman, that outdated thresholds can impose unnecessary burdens and urge the FDIC to build on this momentum.”