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House Financial Services opens 119th Congress hearing stressing regulatory relief for community banks
Summary
Lawmakers and industry witnesses told the House Financial Services Committee that community banks face shrinking numbers and heavy compliance burdens; members from both parties voiced overlapping goals but differed on the role of recent regulatory actions, especially CFPB rules and executive orders.
Chairman French Hill opened the House Financial Services Committee's first full hearing of the 119th Congress, saying the committee will focus on ways to “make community banking great again” and bring what he called common‑sense policy to reduce burdens on small and regional banks. Ranking Member Maxine Waters used her opening remarks to underline bipartisan support for community lenders while sharply criticizing recent executive actions she said threaten those customers.
The hearing drew five witnesses with direct industry or regulatory experience: Pat Kennedy Jr., founding partner at Kennedy Sutherland and a community bank shareholder; Susanna Marshall, Commissioner of the Arkansas State Bank Department; Cathy Owen, executive chair of Eagle Bank and Trust of Little Rock; Rebecca Romero Rainey, president and CEO of the Independent Community Bankers of America (ICBA); and Mitra Spaterra, vice president for federal policy at the Center for Responsible Lending. Each delivered five‑minute statements (written testimony was entered into the record).
The testimony and member questioning repeatedly returned to several themes: the long decline in the number of FDIC‑insured banks; difficulty forming de novo banks; the cost and complexity of compliance with Dodd‑Frank era rules and other federal guidance; uncertainty around CFPB rulemaking (notably section 1071 small business data collection); the burden of Bank Secrecy Act/AML compliance; and how exam coordination and CAMELS ratings are applied to community institutions.
“Community banks know their communities best,” Chairman Hill said in his opening. He and witnesses described community lenders as mainstays for small business and agricultural credit and cited the disproportionate share of small business Paycheck Protection Program loans made by small banks during the pandemic. Testimony documented a long decline in the number of banks: speakers cited roughly 8,500 FDIC‑insured banks in 1999 compared with about 4,500 today, a trend they attributed to regulatory costs, consolidation and barriers to new charters.
Witnesses proposed a set of reforms ranging from targeted tailoring of federal rules for small institutions to specific statutory changes: Rep. Andy Barr and others highlighted the Promoting New Bank Formation Act; industry speakers asked Congress to consider repeal or modification of the CFPB’s section 1071 rule on small‑business loan data collection; and state supervisors and banks emphasized relief from BSA/AML compliance costs and clearer third‑party fintech guidance. Commissioner Susanna Marshall urged coordinated federal‑state supervision and indexing of static thresholds that drive regulatory categorization.
Members from both parties pressed witnesses on operational challenges: exam timelines and appeals, access to low‑cost funding (including brokered deposits and reciprocal deposit arrangements), whether broad regulatory rollbacks would risk financial stability, and how to preserve consumer protections while reducing cost. Ranking Member Waters warned that deregulatory moves could expose community banks and customers to economic harm; other members said tailored relief and faster approvals for de novo charters would expand local credit access.
The hearing produced no formal committee votes or directives. Chairman Hill closed by requesting written follow‑up from witnesses; he adjourned the hearing after members submitted a mix of policy suggestions and pointed questions on CFPB rulemaking, FDIC resolution policy, exam reform and de novo formation.
Ending: Committee members said they intend to pursue legislation and oversight on multiple fronts, including de novo bank formation, exam appeals and data‑collection rules that could affect small‑business lending.
