Crossing $10 billion in assets isn’t just a milestone for financial institutions—it’s a turning point. What looks like a measure of growth quickly becomes a fundamental shift in how a bank operates, earns revenue, and manages risk.
However, this landmark also brings substantial regulatory and compliance obligations, including changes to debit card revenue streams, mandatory participation in annual stress tests, and enhanced infrastructure requirements.
It’s no surprise, then, that banks approaching the $10 billion inflection point often face a new level of uncertainty as their business model begins to evolve.
In a recent PaymentsJournal podcast, Ellen Davitt-Lalwani, Senior Director of Portfolio Advisory Services at Fiserv, and Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research, addressed commonly asked questions about this transition and outlined the leadership, compliance, risk management, and card program strategies that can help ensure a smooth crossover.
The Regulatory Uptick
One of the most impactful aspects of the transition is the requirement to comply with debit interchange regulations under Regulation II, introduced through the Durbin Amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act.
While these rules were passed to strengthen the U.S. financial services system following the 2008 financial crisis, the card-driven payments landscape means they also carry revenue implications for banks crossing the $10 billion threshold.
“Cards are your customers’ primary physical contact with your brand,” Davitt-Lalwani said. “We need to remember that as Regulation II is put into place—as an institution moves from unregulated to regulated—their interchange can be cut by 40% or more and every transaction matters, for both debit and for credit. Interchange cuts also affect consumer and business debit transactions. For some clients, their interchange ranges from 30% to 50% of non-interest income today.”
Indeed, the impact stems from the Regulation interchange cap: $0.21 per transaction, plus five basis points of the transaction amount, and an additional $0.01 for fraud prevention. This is significantly lower than what many midsized institutions currently earn, making it essential to accurately estimate the resulting interchange revenue gap, particularly on debit transactions.
While this is one of the most consequential changes, it is far from the only compliance consideration.
“One of the things that comes into play is Dodd-Frank stress testing, which puts a highlight on bank liquidity and, since you have become a large institution, ensures that you have the wherewithal to survive changes in the economy,” Riley said. “There are other regulations that also come into play that affect revenue, and there are higher compliance costs that come through the Volcker rule, which has to do with investments in private equity and financials in the background.”
Preparing for What’s Ahead
Given these new obligations, banks often have several key questions as they prepare to cross the $10 billion milestone. For example, institutions frequently ask whether they should proactively communicate with regulators and third-party providers about their trajectory.
“That is certainly a ‘yes,’” Davitt-Lalwani said. “In terms of working with prudential regulators as well as third parties, having at least six months advance notice is a good idea. In terms of regulators, feel free to reach out to the Ombudsman’s office. It’s a good opportunity for your financial institution to establish a relationship with your regulator and it gets you off on the right foot.”
“In terms of reaching out to third parties such as Fiserv, Visa, and Mastercard, there is typically an orchestration of operations and technology that needs to take place,” she said. “That six months advance notice gives everyone an opportunity to circle the wagons and put all of the right components in so that when you’re truly ready to step across that threshold, you’re doing it with all parties fully knowledgeable.”
Another common question is whether additional asset thresholds trigger further regulatory requirements. The answer is yes. The $25 billion threshold introduces another layer of complexity, often compounded by the fact that it’s frequently reached through mergers or acquisitions.
As banks near $10 billion in assets, some consider temporarily slowing growth until the necessary infrastructure is in place. This can be supported through deposit management partners such as StoneCastle, which can help move deposits off balance sheet until the institution is ready for the crossover.
However, these partnerships must be established well in advance. Beyond balance sheet management, they also provide a buffer against “flights to safety,” when volatile market conditions drive sudden surges in deposits.
“I’ve been through that $10 billion inflection point and one of the financial institutions that I was employed by experienced that flight to safety just as we were approaching the $10 billion mark, and it pushed us right up over the threshold,” Davitt-Lalwani said. “We are a nation that has a very dynamic socioeconomic market, so preparation is the better part of valor in this. I strongly recommend that financial institutions consider putting those types of tools into place.”
A Regulator in Residence
Preparation also requires a clear understanding of more complex reporting expectations, including enhanced audit, compliance, and risk reporting that often demands new data capabilities.
In some cases, banks should also be prepared for the possibility of an on-site regulatory presence.
“There could potentially be a regulator on-site all day every day with your associates—whether it’s in the cafeteria, walking through the parking lot, or in the elevator,” Davitt-Lalwani said. “They’re going to be able to pick up on conversations and to see and hear things that may not have occurred in prior situations. They’re important components as to how financial institutions need to be prepared and how they can work for success in the future.”
These expanding obligations frequently require investment in both staff and technology. As teams grow—often in unanticipated ways—strong organizational alignment and clear communication becomes critical.
Just as important is maintaining a customer-centric focus. As institutions scale, they can lose the personal touch that differentiates them. Structured feedback mechanisms, such as customer surveys, can help preserve that connection during the transition.
“One of the best customer surveys I’ve ever had was to ask our customers if there was one thing they could change in the near term that would improve their relationship with us, what would that be?” Davitt-Lalwani said. “Your customers and members will tell you where you need to improve so they can willingly work with you and deepen their relationship.”
“On the back end of it, make sure to communicate to your customers or your members that we’re listening to you; we’re hearing what you have to say, and this is how we’re responding to meet your needs,” she said.
Balancing Growth and Risk
Amid these changes, banks must continuously balance revenue generation with enterprise risk management. While the transition can feel complex, the ultimate goal is to position a successful institution for sustained growth.
“You don’t end up at this threshold by accident,” Riley said. “You either got here through organic growth or through a merger. The focus is on the prep work, having everything in place because this is not a casual move and it needs planning that goes in front of it. Life will change when you crossover that barrier. The opportunities are certainly there and the risk is also there.”
Given these considerations, establishing a comprehensive communication strategy ahead of the $10 billion threshold is essential—not just to explain new processes, but also to prevent internal silos or unintended organizational friction.
“You want to make sure that everyone understands that higher water raises all boats,” Davitt-Lalwani said. “It’s important that we fortify the organization in all of the appropriate places Regulators, talk to your associates at the front-line level, at the back-office level, as well as executive and mid-management. (You want to make sure they) have an understanding as to how and why the organization is changing and what the anticipated needs will be.”
“Communication is key, but it can be elusive, so having the board and the executive team devise a plan and putting in listening posts to make sure that the message is getting out there is a great thing to do and should not be overlooked as you embark upon this journey,” she said.
