Why It Matters
The House Financial Services Committee is advancing legislation aimed at reducing regulatory burdens on community banks and encouraging new bank formation. In April, the committee approved H.R. 6955, the Main Street Capital Access Act, raising the question of whether regulatory relief can reverse the sharp decline in new bank charters and improve access to credit for small businesses.
The decline has been significant. According to the Congressional Research Service, the United States chartered roughly 130 new banks annually between 2000 and 2009, compared with about six per year since 2010. H.R. 6955 seeks to address that trend through a series of changes to federal banking regulations.
The Big Picture
H.R. 6955 proposes regulatory relief across several areas of banking law, with each title targeting a different barrier to entry or operational cost.
Under current law, new banks generally must satisfy applicable capital requirements when they open. Section 101 would allow qualifying institutions to phase in those requirements over a three-year period.
The bill also would raise several regulatory thresholds. Section 202 would increase the definition of a small bank holding company from $3 billion to $6 billion in assets. Section 203 would raise the Community Bank Leverage Ratio eligibility threshold from $10 billion to $15 billion in assets and establish automatic inflation adjustments every five years.
Title III would modify the federal supervisory process by exempting additional institutions from certain examinations and creating an independent appeals board to review examination findings.
Title V would narrow the definition of a brokered deposit by excluding certain custodial and reciprocal deposits. Current federal banking rules treat brokered deposits differently because they can be more volatile during periods of financial stress. The proposal would distinguish those deposits from custodial and reciprocal deposits, which generally have different funding characteristics.
Title VI would ease certain merger requirements for transactions involving banks with less than $10 billion in assets, while Title VII would expand the Federal Deposit Insurance Corp.'s authority to use alternative resolution methods when resolving failed banks under certain circumstances.
Political Stakes
The Trump administration has not publicly announced a position on H.R. 6955. The Congressional Research Service analysis of the legislation does not identify an administration position or formal executive branch policy on the proposal.
Supporters argue the bill would reduce compliance costs that disproportionately affect smaller financial institutions and encourage new bank formation. Critics contend broader market forces, including industry consolidation, competition from nonbank financial firms and changing consumer preferences, may continue to limit the creation of new community banks even if regulatory requirements are eased.
The Bottom Line
H.R. 6955 would make broad changes to federal banking regulation by lowering certain compliance burdens, increasing regulatory thresholds, modifying bank supervision and expanding FDIC resolution authority. Supporters view the measure as a way to strengthen community banking and improve access to capital, while its ultimate effectiveness will likely depend on whether regulatory costs are the primary barrier to new bank formation.
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