Why It Matters

The Trump administration's push to ease banking rules got a real-world test on September 18 when four witnesses testified before a House subcommittee in Richmond, Kentucky, about the regulatory burdens crushing community banks. The hearing on the Main Street Capital Access Act revealed near-total alignment among bankers, developers, and regulators on one point: one-size-fits-all rules designed for trillion-dollar institutions are strangling smaller lenders.

The House passed the bill in July with bipartisan support 270 to 155, but it stalled in the Senate. The field hearing, held at Eastern Kentucky University's Center for the Arts, served as a pressure campaign to move the measure before Congress adjourns.

The Main Street Capital Access Act would reshape how federal regulators oversee community banks by indexing capital thresholds to inflation, phasing in requirements for new banks, and requiring regulators to tailor rules to risk profiles rather than asset size. The Trump administration backs the approach.

Yet the hearing exposed a political vulnerability: the witnesses were stacked entirely in the bill's favor. No consumer advocates, community development groups skeptical of deregulation, or federal regulators appeared to defend current rules or warn of systemic risks.

The Case for Change

All four witnesses agreed that regulatory costs are disproportionate to community banks and that rules designed for large, systemically important banks are being applied to small community institutions that pose no systemic risk.

"Regulatory costs are disproportionate to community banks," said Timothy Schenk, President and CEO of the Kentucky Bankers Association, which represents 151 member banks across the state. Schenk recommended raising the asset threshold for enhanced prudential standards and streamlining examination processes.

Kyle Aud testified that he started the chartering process in June 2025 and that it was not until February or March 2026 that he felt confident the bank would succeed. He warned that "regulatory consolidation is bad for competition, innovation, and communities that desperately need local financial institutions."

Jason Hawkins, President and CEO of First United Bank, a rural lender founded in 1996, said the regulatory environment had grown so hostile that "if First United Bank were started today as a de novo bank, it would be much more difficult than it was in 1996." He pushed for capital rules that better reflect the lower systemic risk of community banks.

Zach Worsham, Vice President of Winterwood Inc., an affordable housing developer managing over 14,000 apartments across 340 communities in eight states, testified that virtually all his financing relationships are with community banks. He urged regulators to reform rules limiting construction and development loans on balance sheets.

The witnesses painted a picture of accelerating consolidation. There are 4,555 fewer banks in the U.S. in 2026 than in 2005. Community banks hold roughly 15 percent of total banking assets nationally but make nearly 40 percent of all small business loans. In many rural Kentucky counties, community banks are the only source of financial services.

The Regulatory Backdrop

Rep. Andy Barr, the Kentucky Republican who chairs the subcommittee and is running for Senate in 2026, framed the hearing as a test of whether federal regulators have abandoned proportionality. "Federal regulators have written rules as if every bank in America is a trillion-dollar global institution," Barr said. "Regulation should follow risk, not size, zip code, or political fashion."

Regulators finalized a rule in 2026 lowering the Community Bank Leverage Ratio to a minimum of 8 percent. The American Bankers Association and 52 state bankers associations sent a joint letter urging House passage. The bill drew support from over 100 organizations.

But the Senate has not scheduled a markup or floor vote. While 56 Democrats voted for the House version, 154 opposed it.

What Comes Next

Barr urged the Senate to act before Congress adjourns. "Community banks finance farms, factories, family businesses, and first-time homebuyers," he said. "For Kentucky, community banks are the financial infrastructure of rural America."

The hearing was noticed without objection, and members had five legislative days to submit materials for the record. To date, no Senate markup or floor vote on H.R. 6955 had been scheduled.

The Bottom Line

The hearing's composition raised questions about balance. No witnesses representing consumer advocates, systemic risk concerns, or federal regulators appeared.

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