Retail Banking Regulation Revisions

The #CFPB submitted two proposed rules for publication in tomorrow's Federal Register relative to #ECOA and #fairlending. Both follow up on items from the "spring" rulemaking agenda. The first rule revisits long-standing Regulation B provisions to include and the second would amend the #section1071 small business data collection rule. Proposed edits to long-standing provisions of Regulation B would be a rather marked shift, and include: ✳️ Limiting any "disparate impact" liability under the effects test, which is currently used to determine if a policy may have a discriminatory impact, replacing language in section 1002.6(a) to instead state that ECOA "does not recognize" this test. ✳️ Restrict the use of "special purpose credit programs" that are designed to meet the credit needs of economically disadvantaged classes of borrowers. ✳️ "Further define" the concept of "discouragement," the part of Regulation B that is designed to ensure lenders are not taking steps that may prevent protected classes of borrowers from applying for credit. If finalized, these changes to Reg B could lead more states to adopt fair lending standards. These amendments would also likely face legal challenges as well. The second proposal is the promised amendments to the section 1071 rule to shift to "more modest requirements, focusing on core lending products, lenders, and data." This would include raising the origination threshold from 100 to 1,000 covered credit transactions for each of 2 consecutive years, reducing the gross annual revenue to define a small business from $5m to $1m, and reducing the number of data points including less demographic data. The proposals can be found here: https://lnkd.in/euXcc89U https://lnkd.in/eMWpNN9F

Feb 11, '26: RBI issued 𝗱𝗿𝗮𝗳𝘁 𝗴𝘂𝗶𝗱𝗲𝗹𝗶𝗻𝗲𝘀 𝗼𝗻 𝗥𝗲𝘀𝗽𝗼𝗻𝘀𝗶𝗯𝗹𝗲 𝗕𝘂𝘀𝗶𝗻𝗲𝘀𝘀 𝗖𝗼𝗻𝗱𝘂𝗰𝘁. If a bank mis-sells you a product: → Full refund of amount paid → Compensation for any loss → Cancellation of the sale Not partial. Not after 6-month escalation. Immediate. What counts as mis-selling?   • Selling products unsuitable for customer profile (even with consent)   • Providing misleading/incomplete information   • Selling without explicit consent   • Forcing bundled purchases The behavioral shift RBI is enforcing: ❌ Sales calls only 9 AM - 6 PM (unless customer authorizes) ❌ No dark patterns in UI/UX (banned explicitly) ❌ No incentives from 3rd parties to bank employees ❌ No forced bundling (loan + insurance must allow external purchase) ❌ No pre-ticked checkboxes or default consent Why this matters: Gov Sanjay Malhotra didn't mince words a year ago: "𝗕𝗮𝗻𝗸𝘀 𝗰𝗮𝗻 𝗹𝗲𝘃𝗲𝗿𝗮𝗴𝗲 𝗔𝗜 𝗶𝗻𝘁𝗲𝗿𝗻𝗮𝗹 𝗰𝗼𝗻𝘁𝗿𝗼𝗹𝘀 𝘁𝗼 𝗮𝗱𝗱𝗿𝗲𝘀𝘀 𝗰𝗼𝗻𝘀𝘂𝗺𝗲𝗿 𝗰𝗼𝗺𝗽𝗹𝗮𝗶𝗻𝘁𝘀 𝗼𝗻 𝗺𝗶𝘀-𝘀𝗲𝗹𝗹𝗶𝗻𝗴 𝗮𝗻𝗱 𝗮𝗴𝗴𝗿𝗲𝘀𝘀𝗶𝘃𝗲 𝗺𝗮𝗿𝗸𝗲𝘁𝗶𝗻𝗴." His vision (Jan '26): "Make supervision more off-site, near real-time, using SupTech and AI-enabled tools more deeply." Translation: Manual supervision of millions of interactions/year? Impossible. Retraining alone won't scale. AI supervision will. What banks need to deploy: ✅ Real-time 𝗰𝗮𝗹𝗹 𝘀𝗲𝗻𝘁𝗶𝗺𝗲𝗻𝘁 𝗮𝗻𝗮𝗹𝘆𝘀𝗶𝘀 (pressure tactics, consent gaps) ✅ 𝗣𝗿𝗼𝗱𝘂𝗰𝘁-𝗰𝘂𝘀𝘁𝗼𝗺𝗲𝗿 𝗳𝗶𝘁𝗺𝗲𝗻𝘁 𝗲𝗻𝗴𝗶𝗻𝗲 (pre-sale suitability check) ✅ 𝗦𝗰𝗿𝗶𝗽𝘁 𝘃𝗮𝗹𝗶𝗱𝗮𝘁𝗶𝗼𝗻 using GenAI (policy adherence checker) ✅ 100% interaction coverage (not sampling) ✅ Supervisor dashboards (instant alerts, playback) The math: Manual supervision: ~2-15% sample coverage, monthly / quarterly audits, >₹500/interaction AI supervision: 100% coverage, near real-time (<1 min), ~₹10-50/interaction at scale (& reducing as AI matures) What changes for banking leaders: Internal competition that creates incentives for mis-selling? Banned. Branch KPIs that "push" product sales? Under regulatory scrutiny. You can't scale trust when every branch visit or RM call feels like a product ambush. The strategic choice: Deploy AI supervision infrastructure → Automate compliance → Build trust dividend (and become most trusted bank) 𝗥𝗕𝗜 𝗷𝘂𝘀𝘁 𝗺𝗮𝗱𝗲 𝘁𝗿𝘂𝘀𝘁 𝗻𝗼𝗻-𝗻𝗲𝗴𝗼𝘁𝗶𝗮𝗯𝗹𝗲. The banks that treat this as compliance overhead? 𝗧𝗵𝗲𝘆'𝗹𝗹 𝗯𝗹𝗲𝗲𝗱 𝗡𝗣𝗦. The banks that 𝘁𝗿𝗲𝗮𝘁 𝘁𝗵𝗶𝘀 𝗮𝘀 𝗔𝗜 𝘁𝗿𝗮𝗻𝘀𝗳𝗼𝗿𝗺𝗮𝘁𝗶𝗼𝗻? They'll win retail banking. Because mis-selling isn't just refundable (+compensation). It erodes trust! And the only way to prevent it at scale? AI supervision. Public comments due: Mar 4, '26 Implementation: Jul 1, '26 Rewire sales operations, rebuild CRM & audit workflows, and deploy AI at scale. The clock is ticking. #RBI #BankingCompliance #ResponsibleAI #CustomerProtection #FinTech #SupTech #GenAI

🇪🇺𝗣𝗦𝗗𝟯 𝗗𝗲𝗮𝗹 𝗥𝗲𝗮𝗰𝗵𝗲𝗱: 𝗔 𝗦𝗮𝗳𝗲𝗿, 𝗦𝗺𝗮𝗿𝘁𝗲𝗿 𝗙𝘂𝘁𝘂𝗿𝗲 𝗳𝗼𝗿 𝗣𝗮𝘆𝗺𝗲𝗻𝘁𝘀 𝗶𝗻 𝗘𝘂𝗿𝗼𝗽𝗲 Last week, the EU reached a major agreement on the new PSR/PSD3 rules, the biggest update to #payment regulation since #PSD2. Big news for anyone who pays, shops, or banks online in Europe. This one directly impacts consumers, banks, and #fintech companies. 💡𝗖𝗵𝗮𝗻𝗴𝗲𝘀 #𝗣𝗦𝗗𝟯 𝗕𝗿𝗶𝗻𝗴𝘀  ➡️ Stronger protection against online #fraud: Online payment fraud is rising fast, especially impersonation scams. The new rules change the balance: • Banks and payment providers must introduce stronger checks (e.g., name-to-IBAN matching, better risk monitoring). • If they fail to prevent obvious fraud, they must reimburse you. • Even in impersonation cases (e.g., “fake bank employee” scams), customers will now have clearer rights. This is one of the biggest consumer wins so far.  ➡️ No more hidden fees: You’ll know exactly how much you will pay before the transaction, including the currency exchange fees, ATM fees, and extra charges from payment providers. This transparency was long overdue, and will especially help frequent travellers and cross-border users like myself. ➡️ More fairness between banks and fintechs: The deal gives non-bank payment providers clearer rules and fairer access, which will likely boost competition and innovation, and it should lead to better products and more choice for users ➡️More control over who sees your data: Open banking continues, but with stronger user control. Users will get simple dashboards to decide who can access your data, for what, and for how long. ➡️  The human touch: no more relying solely on chatbots, customers must have access to real people. This is a big step toward more trust in data-sharing and a healthier digital-finance ecosystem. ➡️Cash access stays protected: Retailers can continue offering cash withdrawals, even without a purchase. Important for rural regions, elderly citizens, and anyone who still depends on cash. 📌 𝗧𝗵𝗶𝘀 𝘂𝗽𝗱𝗮𝘁𝗲 𝗺𝗮𝗿𝗸𝘀 𝘁𝗵𝗲 𝗺𝗼𝘀𝘁 𝘀𝘂𝗯𝘀𝘁𝗮𝗻𝘁𝗶𝗮𝗹 𝗼𝘃𝗲𝗿𝗵𝗮𝘂𝗹 𝗼𝗳 𝗘𝗨 𝗽𝗮𝘆𝗺𝗲𝗻𝘁 𝗿𝗲𝗴𝘂𝗹𝗮𝘁𝗶𝗼𝗻 𝘀𝗶𝗻𝗰𝗲 𝗣𝗦𝗗𝟮. 𝗢𝗻𝗰𝗲 𝗮𝗴𝗮𝗶𝗻, 𝘁𝗵𝗲 𝗘𝗨 𝗵𝗶𝗴𝗵𝗹𝗶𝗴𝗵𝘁𝘀 𝗶𝘁𝘀 “𝘀𝗮𝗳𝗲 𝗶𝗻𝗻𝗼𝘃𝗮𝘁𝗶𝗼𝗻” 𝗺𝗲𝘀𝘀𝗮𝗴𝗲.    For consumers, it will soon feel like they’re paying for a service they can trust, with no hidden traps and far stronger protection against fraud.  For providers, it means rethinking operations, compliance frameworks, and customer support infrastructures. The roadmap ahead will demand commitment, but ultimately, this deal lays the foundation for a safer, fairer, and more competitive European payments market. (The deal needs to be formally adopted by Parliament and Council before it can come into force.) 💡More information> https://lnkd.in/dUWYd347 #payments #paymentregulation #EU

In just the past month, we’ve seen sweeping updates to payment regulations across major economies — from the UK and US to South Africa and Thailand. They’re clear signs that regulators are pushing for faster payments, better fraud controls, more transparency, and stronger digital infrastructure. Here’s a quick overview: UK & EU: User Protection and Real-Time Payments • Termination Rules: From April 2026, PSPs must give 90 days’ notice (up from 60) to end contracts — with clear reasons required. • SEPA Instant Payments: Mandatory by Oct 2025 — includes real-time euro transfers, fee parity, and Verification of Payee to fight APP fraud. 📌 Impact: Greater transparency, faster Euro flows, and fraud prevention built into the rails. United States: Digital-Only Mandate & Cybersecurity Uplift • Federal ePayments: Paper checks are being phased out by Sept 30, 2025. All federal payments will move to digital. • Cybersecurity Standards: PSPs must implement multi-factor authentication and AI-led fraud detection. • The GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins Act of 2025): The first-ever federal legislation to provide a clear regulatory framework for U.S. dollar–pegged payment stablecoins 📌 Impact: Real-time disbursements, operational gains, secure digital rails and a framework for stablecoins. Asia-Pacific: Cross-Border Oversight & Crypto Regulation • Japan: Cross-border PSPs must register under the revised Payment Services Act — improving transparency in online commerce. • Thailand: Draft rules expand fraud controls and formally recognize stablecoins like USDC and USDT for digital issuers. • Mobility Payments: APAC regulators are exploring unified transport wallets for commuters. 📌 Impact: Stronger KYC, smarter fraud defenses, and early-stage crypto mainstreaming. Africa: Banking Overhaul & Mobile Money Regulation • South Africa: From June 1, 2025 — new banking laws require fee transparency, 15-day dispute resolution, biometric checks, and stronger digital ID. • Africa-Wide: Mobile money must be issued by licensed EMIs/banks; PAPSS continues to scale local currency settlements. 📌 Impact: Consumer trust, inclusion, and less USD-dependence in intra-Africa trade. Global: Standards That Are No Longer Optional • MiCA & Crypto Licensing: EU’s MiCA is live; more jurisdictions are tightening VASP rules. • ISO 20022: Now mandatory in many infrastructures — enabling structured data, compliance automation, and end-to-end interoperability. • Open Banking: Expanding across LATAM, MENA, and SSA — driving new API and data-sharing requirements. 📌 Impact: Global standardization is no longer a roadmap item — it’s the route to scale. #payments #iso20022 #stablecoins #regulations #banking #openfinance

Strengthening the Digital Era: RBI’s New Norms for Banks The Reserve Bank of India (RBI) has proposed a significant shift in banking regulations, requiring banks to set aside more reserves from April 1, 2025, for deposits facilitated through digital platforms. This means your online term deposits and UPI-linked savings accounts will compel banks to invest more in government securities, unlike traditional deposits opened at physical branches. This move may seem paradoxical given the RBI’s encouragement for digital banking. Recent penalties and restrictions on major lenders for digital lapses underscore the RBI’s dedication to a secure digital banking environment. The rapid collapse of Silicon Valley Bank (SVB) in the US, driven by swift online withdrawals, highlights the risks inherent in digital banking. SVB's downfall serves as a crucial lesson for global bankers. India’s banks must balance technological advancements with risk management, especially with UPI propelling the nation forward. The RBI's proposed regulations aim to prevent potential bank runs in the digital age, recognizing the transformed nature of banking and the new challenges it presents. In an era where misinformation can spread rapidly, even a minor rumor can destabilize a bank. While these regulations are necessary, they come with challenges. Banking stocks have dipped, reflecting concerns over reduced lending capacity and tightened credit due to increased reserve requirements. ICRA estimates the revised Liquidity Coverage Ratio (LCR) norms will necessitate Rs 4 trillion in reserves, affecting banks' lending abilities and profit margins. Analysts foresee a 4-10% reduction in earnings, particularly for public sector banks. To maintain growth, banks might feel the need to attract more deposits. However, Kotak Institutional Equities suggests a gradual approach to meet these requirements, avoiding drastic interest rate hikes that could harm net interest margins (NIMs). The RBI's objective is to fortify the banking system against digital-era challenges. While the short-term impact on bank earnings is notable, the long-term benefit of a more resilient and secure banking system is invaluable. The outcome promises a stronger future for India's banking sector, well-equipped to navigate the complexities of the digital landscape.

Banking regulation is shifting — fast. Here's the latest on what's happening at the FDIC, and why it matters. 🏦 Mergers are speeding up: The FDIC is making it easier for banks to merge, rescinding the controversial 2024 policy. Already, January saw $678 million in deals, up from $567 million last year. 📱 Fintechs may get a boost: The FDIC is softening its stance on deposit insurance for industrial banks, an avenue for fintech to enter banking. From 2010-2023, only five banks formed annually, far below the 144 per year from 2000-2007. 🛑 Regulations are rolling back: Rules on brokered deposits, deposit insurance disclosures, and fintech partnerships are being paused or delayed, some until 2026. What really matters here is the potential for a more competitive banking sector. The FDIC’s moves could lead to more fintech-bank partnerships, more bank M&A activity, and more new entrants. The growth of fintech infrastructure providers (Banking-as-a-Service) is enabling more non-financial firms to offer banking services. This trend, combined with relaxed regulations, could increase competition among traditional banks, FinTechs, and tech giants. Or, it could all backfire. Less oversight could mean riskier banking practices, leading to instability. A looser approach to fintech partnerships might encourage regulatory arbitrage, where firms exploit gaps rather than innovate responsibly. The last time we saw an explosion in new banks? The early 2000s — and we know how that ended. Will a looser FDIC fuel competition or chaos? We shall soon find out.

The European Banking Authority (EBA) has launched a consultation on proposed Regulatory Technical Standards (RTS) in response to the European Commission’s call for advice on new mandates for the #AMLA. These regulatory updates are part of the EU’s evolving AML/CFT framework, enhancing risk assessment, customer due diligence, and enforcement measures across financial institutions. Key Highlights ✅ Enhanced #RiskBased Supervision for FIs • Introduction of new methodologies for assessing inherent and residual risk in FIs under Article 40(2) of AMLD6. • Standardized scoring system for classifying low, medium, substantial, and high-risk entities. • Supervisors must conduct annual risk assessments, with stricter scrutiny for high-risk financial entities. ✅ Direct Supervision of High-Risk Institutions by AMLA • Under Article 12(7) of the AMLAR, AMLA will directly supervise institutions operating in at least six EU member states. • Risk-based selection process to prioritize institutions with high money laundering (ML) and terrorist financing (TF) risks. • Strict thresholds for determining material operations under the freedom to provide services within the EU. ✅ Stronger CDD Requirements • Standardized CDD measures under Article 28(1) of the AMLR, covering: 🔹 Standard CDD, Simplified DD, and EDD protocols. 🔹 More stringent identity verification using eIDAS-compliant tools (where available). 🔹 Risk-based approach for electronic money instruments, ensuring uniform CDD compliance across member states. ✅ Harmonized Sanctions and Enforcement Mechanisms • Under Article 53(10) of AMLD6, a new regulatory framework for applying pecuniary sanctions, administrative measures, and periodic penalty payments (PePPs). • Supervisory convergence across the EU to ensure consistent enforcement of AML/CFT violations. • Introduction of quantitative thresholds for calculating fines and penalties based on gravity of breaches. ✅ Greater Cross-Border Coordination & Data Utilization • AMLA to centralize risk data from national FIUs and AML/CFT supervisors. • Risk methodologies will integrate EuReCA database findings, ensuring a harmonized approach to risk detection and mitigation. • Increased cooperation between AML and prudential supervisors for aligned financial oversight. Takeaways 🔹 Prepare for AMLA Supervision—High-risk entities operating across multiple EU states must be ready for direct oversight. 🔹 Standardize Risk Assessments—Align internal frameworks with EBA’s scoring system for inherent and residual ML/TF risks. 🔹 Strengthen CDD—Ensure compliance with new verification protocols, particularly for electronic and #crypto transactions. 🔹 Align Enforcement Strategies—Expect more stringent fines and compliance penalties under AMLD6’s harmonized sanctioning regime. 🔹 Invest in #AML Technology—Leverage AI-driven monitoring and data analytics to meet enhanced risk assessment and reporting requirements. #FinancialCrime #Compliance

The Minimum Deposit Rate (MDR) was introduced by the State Bank of Pakistan to protect retail depositors by ensuring a guaranteed minimum return on their savings. While Islamic banks were initially exempt due to their Shariah compliant profit-sharing pool mechanism, the MDR imposed fixed return requirements on conventional banks for deposits, including those from corporates and financial institutions (FIs). Conventional banks faced increasing challenges as they sought to comply with the Advance-to-Deposit Ratio (ADR) tax requirements - a policy mandating banks to maintain at least a 50% ADR ratio to avoid heavy taxes imposed by the FBR. To meet these requirements, banks lent to corporates and FIs at KIBOR-minus rates. At the same time, they were mandated to pay MDR on deposits, resulting in negative spreads, where lending rates were lower than funding costs. This setup allowed corporates to exploit an arbitrage opportunity: borrowing at discounted rates and reinvesting those funds into savings accounts, earning guaranteed MDR returns plus a spread, creating a risk-free arbitrage opportunity. This inefficiency undermined the banks' profitability and called for regulatory intervention. To address these issues and ensure equitable treatment across the banking sector, the SBP introduced key changes: MDR Removal for Conventional Banks: From January 1, 2025, MDR will no longer apply to deposits from corporates, FIs, and public limited companies. This allows conventional banks to negotiate market driven rates, eliminate negative spreads, and optimize profitability. MDR for Islamic Banks: Islamic banks are now required to offer a minimum return of 75% of their weighted average gross yield on savings accounts. The policy shift has injected positivity into the banking sector. Conventional banks, now freed from restrictive MDR mandates on corporate deposits, are expected to see improved profitability. Banking stocks have rallied, reflecting investor confidence in the sector’s stronger earnings potential. By addressing arbitrage opportunities and eliminating inefficiencies, these changes not only help banks optimize profitability but also create a more stable environment for both depositors and investors. How do you see these changes impacting the broader financial landscape in the coming years? #BankingSector #FinancialRegulations #MDR #StateBankofPakistan #ADR #BankingProfitability #FinancialInstitutions #PakistanEconomy

Regulators just lowered the Community Bank Leverage Ratio from 9% to 8%. The leverage ratio is straightforward. Tier 1 capital divided by total assets. No risk weighting. It’s a simple measure of how much capital sits behind the balance sheet. For banks that opt into the CBLR framework, staying above that threshold means you’re considered well-capitalized without having to calculate and report the full set of risk-based capital ratios. This means at 9%, a $1B bank needs $90MM in capital. At 8%, it’s $80MM. That difference is capacity that can now support additional loan growth or provide flexibility on the balance sheet. The grace period was also extended. Banks now have four quarters to return to compliance if they fall below the threshold, as long as they stay above 7%. Before, it was two quarters. The rule takes effect July 1, 2026. This lowers the threshold to use the simplified framework and gives community banks more room to operate without changing how capital is measured.

Exciting News for MSME and Business Borrowers! A recent initiative is set to benefit MSME and business segment borrowers by incentivizing prompt payments. With the flexibility of reducing debt positions without any pre-payment charges or foreclosure fees, excess cash flow can now work in favor of borrowers. Moreover, customer retention, akin to managing employee attrition, is a pressing concern for lenders. Ensuring top-notch service will be paramount in maintaining clientele. Notably, loans issued for business purposes to individual borrowers will also be exempt from prepayment penalties. These changes aim to empower retail and MSME borrowers, enabling them to seamlessly transition to lenders offering more favorable terms. This shift eliminates the burden of costly penalties, unlike the current scenario where retail borrowers face a 4-5% penalty on outstanding principal for early repayments. According to a draft circular from the RBI, regulated entities are now restricted from imposing charges or penalties on foreclosure or prepayment of floating-rate loans for individual and MSE borrowers, regardless of co-borrowers, for business purposes. These measures aim to curb the common practice of using prepayment penalties to deter borrowers from switching institutions. Notably, these guidelines apply up to an aggregate sanctioned limit of Rs 7.50 crore per borrower in the case of MSE borrowers. This initiative marks a significant step towards enhancing borrower flexibility and promoting a more borrower-friendly lending environment.