House Republicans propose bill to overhaul community bank regulation

Republicans on the House Financial Services Committee today unveiled a new bill they said would boost community banking by promoting de novo bank formation, raising regulatory thresholds and revising agency regulatory and supervisory practices.

The Main Street Capital Access Act (H.R. 6955) brings together several proposals that had been previously floated in Congress. Committee Chairman French Hill (R-Ark.) and Financial Institutions Subcommittee Chairman Andy Barr (R-Ky.) said the goal of the legislation is to revitalize local bank formation.

Provisions in the proposed legislation include:

• A three-year phase-in period for de novo financial institutions to meet federal capital requirements. It also would lower the Community Bank Leverage Ratio, or CBLR, for rural community banks to 7.5% or the generally applicable CBLR – whichever is lower – during the first three years of operation, and it would require banking agencies to set rules further reducing the CBLR for the initial two years.
• Banking agencies would be required to notify banks whether their applications for mergers or acquisitions are complete within 30 days of submission. Final agency action must be taken within 90 days of the initial submission.
• Banking agencies would be required to consider an institution’s risk profile and business model when issuing new regulations and supervisory decisions, and make certain regulatory threshold adjustments.
• The Federal Financial Institutions Examination Council would be required to develop formal recommendations to revise the CAMELS rating system. The council also must develop an Office of Independent Examination Review to review material supervisory determinations issued by banking agencies.
• Banking agencies would be prohibited from using reputational risk in bank supervision.
• The bill would modify the amount of reciprocal deposits of an insured depository institution that are not considered to be brokered deposits under a graduated scale based on an institution’s total liabilities. It would also establish that custodial deposits of an insured depository institution are not considered to be brokered deposits if the total amount does not exceed 20% of an institution’s total liabilities and the institution has less than $10 billion in assets.

In a statement on X, the American Bankers Association welcomed the legislation.

“We’re eager to work with Congress and the administration on policy changes that will allow America’s community banks to do even more to support the economy,” ABA said.

Read a section-by-section summary of the bill.