What the 2026 ABA Washington Summit Means for Bank Strategy
In Part One of this series, The Regulators Are Listening, I examined the regulatory signals that emerged from the 2026 ABA Washington Summit, the coordinated supervisory pivot to material financial risk, the imminent finalization of Basel III capital reform, liquidity framework redesign, BSA/AML modernization, GENIUS Act implementation, and the revival of de novo bank formation. The conclusion was that the regulatory environment for community and regional banks is more favorable than at any point since before the financial crisis.
Part Two asks the harder question. What should financial institutions actually do about it?
A favorable regulatory environment is a necessary condition for strategic progress, but it is not a sufficient one. The institutions that benefit from this cycle will be those that translate regulatory signals into operational and competitive decisions before the window closes. The institutions that wait for final rules, complete clarity, or the next conference cycle will find that their competitors have already moved.
CCG Catalyst recommends that clients evaluate the Summit’s implications across five strategic dimensions.
Mortgage Lending: The Re-Entry Opportunity
The forthcoming Basel III capital proposal removes the punitive risk weights that have driven mortgage origination and servicing out of the banking system and into non-bank hands for the better part of a decade. Vice Chair Bowman addressed this directly at the Summit, noting that regulatory frameworks including Basel and Dodd-Frank have shifted mortgage servicing activity into non-bank sectors, reducing banks’ role in a traditional business that supports relationship banking. The capital proposal aims to remove those disincentives, enabling banks to return to mortgage origination and to hold mortgages and mortgage servicing assets on their balance sheets without the capital penalties that made those activities uneconomic.
The strategic significance is substantial. Bank-held mortgage servicing assets support the relationship banking model by enabling institutions to work directly with borrowers, understand their financial circumstances, and assist them during periods of stress. These are capabilities that non-bank servicers generally lack and that community banks are structurally well-positioned to provide.
However, re-entering the mortgage business after years of absence is not a simple matter. Institutions that scaled back or exited mortgage operations in response to the adverse capital treatment have lost origination talent, technology platforms, secondary market relationships, and the operational infrastructure required to service loans at scale. Rebuilding these capabilities takes time, and the institutions that begin planning now will have a meaningful advantage over those that wait for the final rule before acting.
Competitive dynamics compound the urgency. Non-bank mortgage servicers have spent the last decade building scale, technology, and market share in the space that banks vacated. The capital rule change creates the regulatory conditions for re-entry, but it does not eliminate the competitive gap that has developed. Banks considering mortgage re-engagement need a realistic assessment of the investment required, the timeline to operational readiness, and the market positioning that will differentiate their offering.
CCG Catalyst is advising clients to begin scenario planning for mortgage re-entry now. The capital rules will create the opening. The question is which institutions will be positioned to act on it when it arrives.
Core Technology and the Provider Relationship
Comptroller Gould’s remarks on core service providers were among the most strategically significant at the Summit, even if they did not generate the same headlines as stablecoin policy or capital reform. The OCC has issued a Request for Information on the relationship between community banks and their core providers, and Gould was direct about what prompted it: extensive feedback from bankers and examiners about the uneven commercial dynamics between smaller banks and concentrated service providers.
This issue connects directly to the work CCG Catalyst published throughout our nine-part OCC RFI series last month. The structural challenges are well documented: three core service providers control approximately 70 percent of the community bank market. Conversion costs are prohibitive. Contract terms are opaque. Innovation timelines are misaligned with market needs. And the billing practices that accompany these relationships impose a material operational burden that drains resources from lending, compliance, and customer service.
What makes the Comptroller’s remarks particularly noteworthy is the connection he drew to artificial intelligence. Gould noted that AI has the potential to level the playing field between the largest and smallest banks, but only if supervisory guidance and core platforms allow community banks to adopt these tools. The OCC is revising its model risk management guidance to ensure that AI does not become the exclusive domain of institutions with the resources to hire large technology teams. That supervisory posture is encouraging. But it is only half the equation.
The other half is whether core service providers deliver the infrastructure, open APIs, real-time data access, and integration capabilities that enables community banks to deploy AI and other advanced technologies in practice. A bank cannot adopt AI-driven transaction monitoring or automated compliance tools if its core platform cannot support the data flows those applications require. The regulatory environment is opening doors. Whether community banks can walk through them depends on technology decisions being made now.
For bank boards and management teams, the implication is clear. Core technology strategy is no longer an operational consideration. It is a competitive one. Institutions that are locked into providers incapable of supporting the next generation of banking capabilities, whether in AI, digital account opening, real-time payments, or stablecoin integration are accumulating a strategic deficit that will compound over time.
Mergers, Acquisitions, and the Consolidation Trajectory
The regulatory conditions for bank M&A have not been this favorable in over a decade.
Vice Chair Bowman is updating the Herfindahl-Hirschman Index competitive factors framework, collaborating with the St. Louis Fed’s Cassidy analysis to ensure merger reviews are aligned with market realities, and working to reduce unnecessary delays in application processing, particularly for banks with strong compliance records. Comptroller Gould has finalized a licensing rule to expedite community bank approvals for business combinations. The FDIC is reforming deposit insurance applications to give more deference to chartering authorities.
At the same time, the structural pressures driving consolidation continue to intensify.
| Driver | Current State |
|---|---|
| Banks under $1B in assets lost since 2010 | 50% |
| Technology investment requirements | Rising, particularly AI, digital, real-time payments |
| Generational transitions | Accelerating at family-owned and founder-led institutions |
| Regulatory compliance costs (relative to assets) | Disproportionately high for smaller institutions |
| Core provider leverage over small banks | Significant, per OCC RFI findings |
For acquiring institutions, this environment creates opportunity that is measurably better than recent years. Regulatory timelines are shortening. Capital rules are becoming more favorable. The supervisory culture is shifting from obstruction to partnership. Banks with strong capital positions, clear strategic plans, and integration capabilities should be actively evaluating targets.
For potential sellers, the calculus is equally important. The conditions for favorable deal terms depend on a regulatory environment that is, by definition, cyclical. The current alignment among the OCC, FDIC, and Federal Reserve on merger facilitation may not persist beyond the current appointment cycle. Institutions for whom a sale or merger is part of the strategic plan should recognize that execution conditions are unlikely to improve from where they stand today.
CCG Catalyst’s advisory work with institutions on both sides of M&A transactions has accelerated materially in the last six months. The pattern is consistent, acquiring banks are moving earlier in their evaluation processes, and selling institutions are engaging advisors before they would have in prior cycles. The regulatory signals from the Summit will amplify both trends.
BSA/AML Compliance as a Strategic Investment
The AML modernization agenda articulated at the Summit represents a genuine opportunity to convert a cost center into a competitive advantage. Chairman Hill’s vision for risk-focused compliance, prioritizing actual threats over volume-based activity reporting, fundamentally changes the economics of compliance investment.
The key signal was Hill’s direct acknowledgment that the defensive compliance culture has deterred technology adoption. Banks have been reluctant to deploy AI-driven monitoring systems because of concerns that new tools would reveal historical issues that examiners would then use as enforcement leverage. Hill’s response was unequivocal, the FDIC wants banks to innovate in this space and will ensure its supervisory approach encourages adoption rather than punishing it.
The strategic calculation is straightforward. Banks that invest in AI-driven transaction monitoring, modernized customer identification systems, and risk-based SAR filing processes will achieve three outcomes simultaneously. They will reduce compliance costs as false positives decline, and investigator resources are redirected to substantive risks. They will be better positioned in supervisory examinations as agencies recalibrate expectations around technology-enabled compliance. And they will do a better job of actually detecting and preventing financial crime, which is the stated objective of the entire regulatory framework.
The risk is inaction. Banks that continue operating under the defensive compliance model, filing volume-based SARs and allocating investigator time to low-risk alerts, will find themselves on the wrong side of a supervisory expectation that is moving clearly toward technology-enabled, risk-prioritized approaches.
Deposit Insurance, Thresholds, and the Legislative Outlook
The deposit insurance conversation at the Summit was substantive but unresolved, and institutions should plan accordingly.
Chairman Hill outlined three dimensions of potential reform (1) raising the $250,000 coverage cap, (2) expanding emergency guarantee authority, and (3) adding flexibility to the least cost resolution framework. The FDIC has not taken a formal position on specific legislation, but Hill’s articulation of a system-wide, time-limited guarantee authority, as distinct from the institution specific systemic risk exception invoked in 2023, gained significant traction. The appeal is obvious: a framework that avoids creating the perception that only the largest banks receive protection during systemic events.
The FDIC is also pursuing indexing of regulatory thresholds. Hill noted that the agency was the first to propose indexing thresholds to inflation or other metrics and plans additional proposals to index interagency thresholds that currently impose cliff effects on growing institutions. Vice Chair Bowman identified threshold indexing as a top near-term priority, noting that fixed asset thresholds cause banks to be subject to disproportionate regulatory frameworks prematurely when they cross arbitrary benchmarks at $10 billion, $80 billion, or $100 billion in assets.
For bank strategy teams, the uncertainty around deposit insurance reform is itself a planning variable. Deposit insurance modernization, whatever form it takes, will change the competitive dynamics around deposit gathering, the relative attractiveness of different account types, and the economics of the Deposit Insurance Fund. Institutions that are investing now in treasury management capabilities, business banking relationships, and diversified deposit strategies will be better positioned regardless of where the cap lands or whether Congress acts in this session.
The regulatory environment revealed at the 2026 ABA Washington Summit is creating opportunities that the community and regional banking sector has not seen in over a decade. Supervisory reform is reducing unnecessary burden. Capital rules are being recalibrated to support traditional banking activities. Technology adoption is being encouraged. Merger approvals are being streamlined. And de novo bank formation is being actively supported for the first time since 2008.
None of these conditions are permanent. They reflect a specific alignment of leadership, policy priorities, and political will that is, by its nature, subject to change. The institutions that treat this environment as a catalyst for strategic action in mortgage lending, technology modernization, M&A execution, compliance investment, and deposit strategy will be the ones that emerge from this cycle in a stronger competitive position.
The institutions that wait will not.
CCG Catalyst works with community and regional banks, credit unions, and fintech companies on strategy, regulatory readiness, technology planning, and competitive positioning. If your institution is working through these questions, reach out to our team at www.ccgcatalyst.com.
By: Paul Schaus | Founder & Managing Partner, CCG Catalyst Consulting
Disclaimer: The views expressed in this article represent the perspective of CCG Catalyst Consulting based on our direct experience advising financial institutions. This commentary is intended to stimulate industry discussion and does not constitute legal, accounting, or regulatory advice.
