BRUNSWICK, ME – U.S. Senators Angus King (I-Maine), Orrin Hatch (R-Utah), and Bill Nelson (D-Fla.) have introduced the Community Bank Relief Act, bipartisan legislation that would provide regulatory relief to small financial institutions. The bill preserves financial safety measures and broadens small bank lending opportunities that will provide families, small businesses, and start-ups better credit options.

“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,” Senator 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.”

“Smaller banks are at the heart of our local communities and national economy,” Senator 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.”

“Community banks are connected to local residents in ways large banks cannot be,” Senator 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.”

More 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. For safety purposes, the Federal Reserve may still exclude any bank holding company (BHC) or savings and loan company if the Board determines such action is warranted.

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 (by comparison, 87 percent of BHCs are covered as of December 31, 2016).

Since subsidiary banks are already subject to capital requirements, making the parent small BHC subject to capital requirements is overly onerous and not necessary for financial resilience. The Community Bank Relief Act helps advance the complementary goals of banking soundness, regulatory efficiency, and economic growth.

Last week, Senators King, Hatch, and Nelson sent a letter to the to the leaders of the Senate Banking, Housing, and Urban Affairs Committee urging them to hold hearings on legislation that would help provide regulatory relief to smaller financial institutions.

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