The House of Representatives passed legislation this week with several measures intended to ease the regulatory burden for community banks. .The bill, which passed the House Feb. 9, would provide an 18-month examination cycle and other examination relief for banks with up to $6 billion in assets and streamline the application process for de novos. The bill would create a two-year pilot program to spark the creation of new banks — especially in rural areas — by offering regulatory, capital and lending flexibility. Community banks would be allowed to hold custodial deposits and more reciprocal deposits without those being classified as brokered deposits. The bill also requires federal banking agencies to study how to improve the profitability, capital adequacy and growth of rural banks. The bill would create a Treasury Financial Agent program to spark partnerships between rural community banks, minority depository institutions and other financial institutions. The community bank legislation was part of a broader Housing in the 21st Century Act that passed the House by a 390-9 vote. The package, which now heads to the Senate for negotiations, includes measures to modernize rural housing programs and increase affordable and manufactured housing. The Independent Community Bankers of America supports the bill “for its numerous pro-community bank regulatory reforms that will help spur home construction nationwide and help alleviate the housing crisis,” said ICBA President and CEO Rebeca Romero Rainey. The Senate passed its own bipartisan, housing bill in October, the ROAD to Housing Act. The Senate proposal does not include the same community bank provisions but does propose increasing the Public Welfare Investment cap for banks to 20 percent from 15 percent. The Trump administration has supported the Senate version.The chances of the community banking provisions being passed into law is complicated by the Senate filibuster, said Hamline Political Science Professor David Schultz. However, he noted the strong bipartisan support the bill received in the House raises the chances of it passing the Senate. Discussing the broader context of the bills, Schultz said the legislation is part of President Donald Trump’s pledge to address affordability and ratchet down interest rates as more voters express disapproval of the administration’s approach to reducing inflation.
