U.S. Rep. French Hill (R-AR) is seeking comments on a set of principles he developed that support a growing community banking industry.
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“The House Financial Services Committee has not had a former banker hold the gavel in over a century. As a former Founder, Chair and CEO of a community bank, I have a plan to make community banking great again in this country,” Hill said. “I welcome feedback on these principles and look forward to advancing President Trump’s economic growth agenda and bringing fresh ideas to support banks of all sizes, which serve communities nationwide and are a source of strength for our economy.”
Hill laid out the following principles:
- The Federal prudential regulators should not be able to order institutions to terminate a customer’s account without a material reason for doing so.
- Climate stress testing should be optional for financial institutions and prohibited from being used in connection with the setting of prudential capital requirements.
- The concept of tailoring should be re-established in prudential regulation and supervision.
- The Federal prudential regulators should be open to innovation in a way that is consistent with safety and soundness and provide clear supervisory expectations to financial institutions about their third-party relationships including with financial technology companies.
- The Federal prudential regulators should conduct a review periodically on the cumulative impact of their regulations.
- U.S. engagement with intergovernmental regulatory bodies like the Basel Committee and the Financial Stability Board should be reformed to reconsider who represents the United States at those meetings.
- There should be more fairness, accountability, and transparency in the bank examination process, including a new process for institutions to appeal supervisory determinations.
- The timing of supervisory examinations should be coordinated between federal and state regulators to streamline the exam cycle for individual institutions and reduce the compliance burden.
- The $10 billion threshold for financial institutions subject to the CFPB supervisory authority under the Dodd-Frank Act should be raised and indexed to inflation.
- The consolidated asset threshold, below which well-managed and well-capitalized banks qualify for an 18-month examination cycle instead of a 12-month cycle, should be raised.
- The community bank representative on the Federal Reserve Board of Governors should play a more active role in the supervision and regulation of community banks.
- The federal prudential regulators should amend the Capital Adequacy, Asset Quality, Management, Earnings, Liquidity, and Sensitivity to Market Risk (CAMELS) rating system.
- The Federal Deposit Insurance Corporation (FDIC) should modernize Call Report data for banks based on deposit type, size, mean, median, and duration, and the inclusion of disaggregated fraud losses.
- The Federal prudential regulators and other appropriate agencies should jointly submit a plan to Congress to address the surge in mail theft-related check fraud and debit card fraud at the point of sale.
- Any application for a bank merger or acquisition should be deemed approved unless expressly denied by the federal banking regulator within 120 days of filing.
- The Federal Reserve Board should defer to the regional Federal Reserve bank on the decision to approve or deny a bank merger between small and/or mid-sized institutions, with some provisions.
- There should be more flexibility in approving bank mergers and acquisitions by a variety of potential partners in counties without a physical bank or credit union branch.
- The prudential regulators should jointly examine ways to improve the growth, capital adequacy, and profitability of U.S. banks.
- Nonbank capital sources should be allowed to partner with qualified banks to be pre-approved for a “shelf charter” with the FDIC as candidates for mergers and acquisitions transactions.
- The FDIC should waive the Least Cost Resolution (LCR) in the event of a bank failure if the agency finds that the transaction would increase competition and facilitate economic growth, with some provisions.
- It should be harder for the FDIC to waive the national deposit cap rule for the acquisition of a failing or failed bank.
- The methodology to evaluate bank mergers and competition for proposed transactions should be revisited.
- The FDIC should uphold its 2020 brokered deposits rule and withdraw its poorly crafted 2024 proposal on brokered deposits.
- The consolidated asset threshold under the Small Bank Holding Company Policy Statement should be raised to allow more community banks to grow using certain debt financing.
- The maximum number of shareholders allowed to qualify for a Subchapter S bank should be increased.
Hill is requesting comments on these principles by Dec. 31. The comments will guide the development of his forthcoming legislative framework going into the 119th Congress.