Press Releases

Today, the Subcommittee on Financial Institutions, led by Subcommittee Chair Andy Barr (KY-06), held a hearing aimed at promoting a healthy banking industry for institutions of all sizes. This hearing continues the Committee’s work to advance its “Make Community Banking Great Again” agenda.

On the need for a healthier and more competitive banking sector:

“The current misalignment in the regulatory treatment of brokered, reciprocal, and custodial deposits have placed handcuffs on small, well-managed financial institutions’ ability to sustainably fund themselves and reform is necessary. … Restrictions on various deposit types such as brokered, reciprocal, and custodial should be based on actual risks to stability, not the whims of banking regulators,” said Subcommittee Chair Barr. 

“Our focus today is on improving the FDIC’s resolution process in a way that ensures financial stability, protects taxpayers, and strengthens confidence in the banking system,” added Chairman French Hill (AR-02).

On the importance of reciprocal deposits:

During his questioning, Subcommittee Chairman Barr asked Robert James, President and Chief Executive Officer, Carver Financial, to offer his thoughts on the importance of reciprocal deposits and the Committee’s bipartisan H.R. 3234. James replied, “The institution that we have this relationship with, which is using a reciprocal deposit product, decided that because of the impact that we’re having at community, that they want to increase the amount of that deposit. Those funds will be made directly available to underserved, urban, and rural communities all across the state of Georgia.” 

On the effect of broad regulatory requirements on smaller institutions:

“When Congress passed S. 2155, we recognized that small community banks, particularly those in rural areas, were being overburdened by capital requirements that were originally designed for the largest and most complex institutions. That's why we created the community bank leverage ratio [CBLR]. The CBLR was intended to provide a simpler, more appropriate capital framework for low-risk community banks. It was supposed to reduce compliance costs and give small institutions a clearer path to demonstrate capital adequacy, allowing them to focus more on serving their customers and less on navigating complex regulatory frameworks. However, the results so far suggest that the framework is not functioning as intended. Today, only about 41% of eligible community banks have chosen to opt in. That tells us there's a disconnect between the policy goal and the practical outcome. For small banks operating with limited staff and tight margins, unnecessarily high capital requirements mean fewer loans to small businesses and fewer resources for their communities,” said Rep. William Timmons (SC-04).

Witnesses echoed the work of the Committee:

Dory Wiley, President and Chief Executive Officer, Commerce Street Holdings said: “The United States is the only country in the world with a robust community banking system, and its contribution to job growth and small businesses is often greatly underestimated. … My recommendations reflect many of the priorities of bankers and trade associations, which advocate for a vibrant, community-focused banking sector that supports tailored regulation, reduced regulatory burdens, and economic growth while ensuring financial stability.”

James B. Barresi, Partner, Squire Patton Boggs said: “Our banking system has consistently demonstrated characteristics that many of us describe with pride as “American.” It has been resilient, service-minded, creative, growth-oriented, and it includes a wide variety of financial institutions with different attributes, resources and business plans. Our diverse banking system has enabled prosperity, upward mobility and stability across wide and very different swaths of America including, among many others, large corporations and small businesses in every industry imaginable, schools, charitable organizations, hospital systems and, of course, citizens in every economic bracket and in big cities and small towns all across America. … America’s banking industry has benefitted from a strong and just legal system and a regulatory regime that has, for the most part, helped keep it safe, sound and stable. Regulatory agencies have served as valuable partners to the banks they oversee and the American public. However, like many industries, the banking industry is struggling to adapt to technological change and innovation that is occurring at the fastest pace in human history. In my opinion, the nature of our bank regulatory regime makes it significantly more difficult for banks to adapt to technology and innovation than for companies in most other industries, including in many heavily regulated industries.”

Hugh Carney, Executive Vice President of Financial Institution Policy and Regulatory Affairs, American Bankers Association said: “ABA recommends that Congress direct the FDIC not only to factor potential community impact into the considerations driving a resolution strategy in each case but also to provide the FDIC with the power to balance the least cost test for community bank failures with options to mitigate negative impacts on the relevant communities. One way to achieve this is by allowing an exception to the least cost test for a resolution method that would preserve financial services essential to communities or otherwise meet the convenience and needs of the community in the specific case. For example, this would allow the FDIC to carve out pieces of a failed institution franchise within specific footprints, markets or geographic areas for bidding by acquirers who might not wish to bid on the entire franchise of the failed bank. Moreover, given the value of deposits, which are the lifeblood of banks, smaller banks would be given the option of acquiring any deposits that are unwanted as the failed bank is being unwound. This approach could increase the likelihood of maintaining a higher level of banking services in the communities in question.”

Norbert Michel, Vice President and Director, Cato Institute Center for Monetary and Financial Alternatives said: “The banking industry needs a timelier and more transparent regulatory framework for M&A activity, but not merely to avoid creating a “barbell” structure or any other type of industry concentration. It needs a better system because relying on subjective criteria, as well as things like concentration ratios and geographic metrics, makes it more difficult for banks to serve customers. It also concentrates power in the federal government and creates a more fragile banking and financial sector. Banks face competition from other banks, as well as from fintech firms, online lenders, and other non-bank financial firms. They should be allowed to merge, enter, and exit as they see fit, to best compete and serve their customers.”

Robert James, President and Chief Executive Officer, Carver Financial Corporation, on behalf of National Bankers Association said: “Bank mergers are essential for maintaining a dynamic and resilient banking system that includes institutions of varying sizes and business models, among other things. Mergers enable banks to afford technology that is needed to properly serve customers in the digital age and compete with non-bank providers of financial services. Mergers also enable banks to achieve economies of scale and enhance operational efficiency so they can better compete in an evolving financial landscape and attract the capital needed to serve customers and communities. Bank mergers can lower loan costs for consumers, foster innovation in services, and strengthen cybersecurity and data privacy measures. Mergers can also solve challenging succession planning problems for banks.”