The news: US House Financial Services Committee Chairman French Hill, R-Arkansas, announced a hearing on “Making Community Banking Great Again” for February 5, per the committee’s website.
Based on Hill’s plan for the banking industry outlined by American Banker, here’s what financial institutions (FIs) can expect federal legislators to discuss:
Regulatory reform and oversight:
- Streamlining regulations to reduce compliance burdens
- Revisiting the FDIC’s brokered deposit rule and improving the appeals process for bank supervisory decisions
- Preventing regulators from forcing banks to close accounts based on customer industries like firearms and digital assets
- Calling for congressional investigations into regulatory agency actions to ensure compliance with legal standards
Capital access and growth:
- Making it easier for community banks to attract capital—which could boost relationships with their SMB customers who must sometimes turn to their competitors for loans
- Expanding eligibility for “Subchapter S” tax status to help banks reduce tax burdens
- Supporting stronger collaboration between community banks and fintechs to enhance innovation and competition
Our take: Community banks have faced increasing challenges amid rising regulatory pressures, consolidation in the financial sector, and competition from larger institutions and fintechs. However, with the upcoming congressional hearing and Hill’s proposed agenda, there appears to be renewed focus on advocating policies that could provide relief and growth opportunities for these institutions. This could also mean legislators are sympathetic to community banks’ complaints about credit unions’ bank acquisitions.
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