Bipartisan Bill Seeks to Help Small Banks Serve Communities

Today, Reps. Mia Love R-UT, Josh Gottheimer D-NJ, and Gregory Meeks D-NY have introduced H.R. 4771, the Small Bank Holding Company Relief Act of 2018. This bill makes changes in the law to help small banks around the country get access to the capital they need to serve their communities. This change will help hundreds of small banks and thrifts, currently restrained in their lending due to capital guidelines that were originally established for larger institutions.

The bill would simply raise the consolidated asset threshold under the Federal Reserve’s Small Bank Holding Company Policy Statement from $1 billion to $3 billion. The Policy Statement exempts small institutions under the threshold from the Fed’s Tier 1 capital and capital-to-risk-weighted assets ratio requirements. The effect of the increased threshold will be to allow more small bank holding companies to downstream the proceeds of any debt or equity they issue to their banking subsidiaries, helping those institutions make loans and service their communities.

According to Rep. Love, “Smaller banks are the lifeblood of many local communities in Utah. They support the credit needs of low and middle income families as well as the small businesses, farmers, and entrepreneurs that create jobs. Community banks are a major, and sometimes the only, lending source for a lot of hard working and ambitious people.”

When these community banking institutions are overwhelmed with regulations and mandates – many of which are meant for larger institutions – it is the hard working Americans in those communities that suffer. The exemptions provided in this bill will make it easier for small banks and thrifts to continue operating in communities that would otherwise lack sufficient banking services.

Rep. Gottheimer said: “Community banks are an essential element of our communities-- helping our families buy homes and small businesses get off the ground in North Jersey. But these economic engines have been under historic pressure from new, unnecessarily burdensome regulations. Regulatory relief and cutting bureaucratic red tape will increase access to capital for community banks and their customers-- our Jersey families and businesses. The bipartisan Small Holding Company Relief Act will help residents of the Fifth District by spurring business job growth and access to credit.”

Rep. Meeks said: "Small banks are essential for our communities. When large institutions fled certain areas after the financial crisis, small banks continued to serve them. We must encourage their lending so they can continue to provide critical banking services to communities with limited options. Former Chair Yellen made inroads on this issue by raising the threshold for the Fed’s Small BHC Policy Statement. After two years, I’m glad to join my colleagues Reps. Mia Love and Josh Gottheimer to propose a slight increase of that threshold consistent with bipartisan negotiations taking place on community banking relief. This is an important way in which we can support community-focused institutions."