Member Corner

SMART Act reduces regulatory burdens on well-run financial institutions

By Rep. William Timmons (SC-04)
October 3, 2025

Financial institutions play a vital role in the economic success of our local economies. They provide essential services to families and small businesses while driving community development and expanding opportunity in urban and rural communities across the country.

As a member of the House Committee on Financial Services, former member of the South Carolina Senate and a small business owner, I have seen firsthand the impact local banks and credit unions have on the communities they serve — offering support to families, small businesses and local economies.

Unfortunately, excessive regulatory burdens and compliance costs have inhibited many community banks from efficiently operating, growing and serving their customers. They often don’t have the resources to navigate complex regulations and struggle under the weight of current regulatory requirements, leading to a shrinking number of community banks across the country and putting our nation’s financial system at risk. In fact, over the past two decades, the number of community banks dropped by 46 percent from 7,620 in 2003 to 4,129 in 2023.

The one-size-fits-all model to regulation created under the 800-page Dodd-Frank Act disproportionately impacts community banks and limits their ability to lend. This translates to fewer and more expensive loans, stifling innovation and limiting growth in our local communities. That’s why I introduced H.R. 4437, the Supervisory Modifications for Appropriate Risk-based Testing (SMART) Act of 2025. This bipartisan bill, which passed the Financial Services Committee and is now on its way for a vote on the House floor, works to reduce regulatory burdens on well-managed and well-capitalized financial institutions.

The SMART Act provides a practical risk-based approach that increases regulatory efficiency, allowing strong institutions to devote more time and resources to their customers and communities. Under this bill, qualifying institutions would undergo full-scope on-site exams only every other cycle with reviews focused on key risk areas. In addition, institutions would be able to request that certain exams, including safety and soundness, consumer compliance and cybersecurity, be conducted concurrently. This reduces the disruption and administrative burden of multiple overlapping visits.

The bill also directs regulators to issue rules within 12 months, striking the right balance between exam relief and supervisory responsibility. At the same time, it maintains robust oversight where needed. Regulators would retain full authority to conduct additional reviews at any time, and exceptions would apply for institutions with recent enforcement actions or major changes in control.

The Financial Services Committee recognizes that strong performance and a proven track record should earn a more streamlined oversight process. We believe that institutions with a history of sound management should not be burdened by duplicative or unnecessarily costly examinations. Committee Republicans are dedicated to restoring common sense to banking through our “Making Community Banking Great Again” agenda, which emphasizes the importance of fostering a regulatory environment that is conducive to growth and innovation.

With the SMART Act, we can ensure well-managed and well-capitalized banks are not bogged down by red tape coming out of Washington, D.C. but are free to do what they do best — support families, small businesses and local communities. My bill enables banks from Greenville to Spartanburg to concentrate on what truly matters: fostering economic growth in their communities and helping South Carolinians build a stronger future.