The House Financial Services Committee passed legislation last week, the Main Street Capital Access Act (H.R. 6955), which seeks to strengthen community banks and encourage bank formation.
“Community banks are the heartbeat of Kentucky’s economy. They power our small businesses, support our farmers, and help families achieve the American Dream. That’s why we must advance a regulatory framework that encourages growth and fuels economic activity on Main Street,” Barr, the Chairman of the Subcommittee on Financial Institutions, said.
Specifically, the bill would:
- Establish a three-year phase-in period for capital requirements, giving newly chartered banks time to grow deposits and build lending portfolios before meeting full regulatory thresholds.
- Reduce regulatory barriers that discourage new bank formation by requiring federal regulators to provide clearer guidance and more transparency in the chartering and supervisory process for new banks.
- Tailor federal banking regulations to bank size and risk profile, ensuring community banks are not forced to comply with the same rules designed for the largest Wall Street institutions.
- Simplify regulatory reporting requirements for small and mid-sized banks, reducing costly compliance burdens that divert resources away from lending to local businesses and families.
- Improve the bank examination process by requiring regulators to apply clearer and more consistent supervisory standards, including reforms to how banks are evaluated under the CAMELS rating system.
- Support credit unions serving local communities by modernizing regulatory requirements and reducing unnecessary administrative burdens that limit their ability to provide affordable financial services.
- Expand flexibility for credit unions to serve underserved and rural communities, helping ensure families and small businesses have access to affordable loans and financial services.
- Encourage competition in the financial system by strengthening local lenders—both community banks and credit unions—so they can better compete with large national financial institutions.
“We applaud Chairman French Hill and Subcommittee Chairman Andy Barr for their leadership in advancing the Main Street Capital Access Act, which will strengthen community banks by spurring new bank formation, promoting common-sense tailoring, improving supervision and more. We look forward to working with Congress and the administration on additional policies that will help community banks support local businesses, families and the broader economy,” Rob Nichols, president and CEO of the American Bankers Association, said.
Since the 2008 financial crisis, new bank formation has slowed significantly. There were 181 charters granted in 2007; but between 2010 and 2019, fewer than ten new banks opened, on average, per year. Further, a total of 794 rural counties lost a combined 1,553 bank branches between 2012-2017, a 14 percent decline.
“This bill will strengthen regulatory supervision, accountability and transparency, and promote a healthy and more competitive banking industry. We appreciate your recognition of the important role that retail banks of all sizes play in driving the economic engine of America and helping Main Street thrive,” Lindsey Johnson, president and CEO of the Consumer Bankers Association, said.
The bill now moves to the full House of Representatives for a vote.