Washington, D.C. — Paige Pidano Paridon, Bank Policy Institute Executive Vice President and Co-Head of Regulatory Affairs, will testify today at a House Financial Services Committee titled “Future of Payments: Promoting Innovation and Fair Markets.” In her testimony, Paridon calls for payments innovation that reinforces the robust regulatory framework rather than evading it.  

“The United States has the most innovative, deepest and most resilient banking system in the world. That did not happen by accident,” Paridon said in written testimony. “It is the product of a carefully constructed framework of federal oversight, deposit insurance, prudential supervision and central bank infrastructure – a framework that BPI’s member banks have built and operate within every day. Innovation should strengthen that framework, not circumvent it. The rules governing novel charters and Federal Reserve account access should reflect that principle.” 

• Setting the Stage. Paridon’s testimony examines the competitive U.S. payments ecosystem, with a range of options available to consumers. She describes the innovations that have developed within the bank regulatory perimeter, such as tokenized deposits. The greatest risk to payments is cybersecurity, Paridon noted, drawing a contrast between banks’ significant investments in cyber defenses and nonbanks’ weaker safeguards.  

• Master Accounts, Novel Charters. Paridon warns of the risks presented by less-regulated institutions, such as uninsured depository institutions, obtaining direct access to the banking and payments system through novel charters and Federal Reserve master accounts. Such access could put a stable financial system at risk. Firms with novel charters must be subject to robust BSA/AML and operational risk requirements and federal oversight, Paridon argues. 
• Innovation on a Level Playing Field. “Banks support innovation and welcome competition in financial products and services, so long as the innovation is conducted responsibly, consumers are protected and all entities operating in the ecosystem are subject to prudential requirements designed to ensure their safety and soundness, such as capital requirements (including operational risk capital), deposit insurance and discount window access,” Paridon said. “Competition should be based on the products and services offered rather than on the ability to evade regulation and supervision.” 

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The Bank Policy Institute is a nonpartisan public policy, research and advocacy group that represents universal banks, regional banks and the major foreign banks doing business in the United States. The Institute produces academic research and analysis on regulatory and monetary policy topics, analyzes and comments on proposed regulations, and represents the financial services industry with respect to cybersecurity, fraud, and other information security issues.

Sam Fabens
Bank Policy Institute
sam.fabens@bpi.com