Housing bill shows legislative momentum for community banks

Editor's Note: This column was part of the July 16 Pulse sent to more than 13,000 email subscribers. A housing bill with multiple regulatory reforms for community banks recently became law. The bill’s bipartisan support was a significant victory for community bankers. .Considered the largest housing bill since 1990, The 21st Century ROAD to Housing Act also featured several banking provisions, including an updated, 18-month examination cycle for banks with up to $6 billion in assets. The bill allows community banks to have more custodial deposits and reciprocal deposits without being classified as brokered deposits. The legislation streamlines the application process to spark de novo community bank formation and establishes a two-year pilot program to promote the formation of new banks, particularly in rural areas, by offering more flexibility in regulations, capital and lending.The bill passed the House by a 396-13 vote and the Senate by an 85-5 vote. While the heart of the law is housing — it bans private equity firms and large institutional investors from owning more than 350 single-family homes — the willingness of most of Congress to greenlight the community bank provisions is a sign of the significant support smaller banks have in Washington, D.C. Tailored regulations are good for community bankers, who should not face the same standards as larger financial institutions. Last week, Federal Reserve Vice Chair for Supervision Michelle Bowman said community banks should face tailored artificial intelligence regulations based on their size and risk profiles. “Our focus is on promoting innovation at financial institutions of all sizes, not just the largest ones,” Bowman said. Bowman’s comments — and Congressional action — reflect the positive environment for community bankers in Washington, D.C. The significant bipartisan support for easing the regulatory load on community banks shows the positive environment will likely continue.