U.S. Sens. Angus King (I-ME), Orrin Hatch (R-UT), and Bill Nelson (D-FL) introduced last week a bill to expand the number of community banks that can lend to small businesses.
Specifically, the Community Bank Relief Act would require the Federal Reserve to expand the number of institutions to which the Small Bank Holding Company Policy Statement applies by increasing the asset size threshold from $1 billion to $5 billion.
“It’s common-sense to know that Maine’s community banks are different from large Wall Street banks. But too often today, regulations from Washington treat them as if they’re the same, and community banks – along with the Maine people they serve – are paying the price,” King said. “This bill will help provide relief and flexibility to community banks across Maine that are a critical source of the capital that helps drive our state’s economy.”
To protect consumers, the bill states that the Federal Reserve may still exclude any bank holding company (BHC) or savings and loan company if it determines such action is warranted.
“Smaller banks are at the heart of our local communities and national economy,” Hatch said. “Sadly, these banks, and the local economies they serve, are being squeezed hard. Post-crisis policies and excess compliance disproportionately hit community lenders relative to large banks, even though community banks were not at the source of the crisis. This bipartisan bill makes a critical improvement to Dodd-Frank without compromising safety standards. This legislation also helps small financial institutions provide households and small businesses more quality-based loans that will invigorate our local communities.”
Data from the Federal Deposit Insurance Corporation indicates that raising the asset threshold to $5 billion would affect 443 BHCs and savings and loan holding companies. The bill would also have a dual impact on their subsidiary banks (namely 457 community banks). Based on information provided by the Federal Reserve, 96 percent of BHCs and savings and loan holding companies would be covered by the Small Bank Holding Company Policy Statement should the asset threshold increase from $1 billion to $5 billion.
Currently, 87 percent of BHCs are covered.
“Community banks are connected to local residents in ways large banks cannot be,” Nelson said. “It’s important to ensure that they can continue to meet the needs of local businesses and ordinary Americans without being tripped up by regulations meant for larger banks.”