The House Proposes Regulatory Relief for Small Banks
The U.S House of Representatives has recently passed three bipartisan bills aimed at providing regulatory relief and support for community lenders. These bills are part of an ongoing initiative by House Republicans to reduce the regulatory burdens on small financial institutions, thereby improving their operational efficiency and ability to serve customers. The bills were led by French Hill, R-Ark., Chair of the House Financial Services Committee, and a major proponent of a “make community banking great again” agenda announced in 2024.
The SMART Act
One of the bills passed is the SMART Act of 2025. This legislation seeks to tailor the supervision requirements for firms with assets less than $6 billion that are deemed well-managed and well-capitalized. The SMART Act offers a less intense examination process for banks meeting certain criteria, such as minimum capital thresholds, no ongoing enforcement actions, no recent ownership changes, and positive supervisory management ratings. The purpose of this act is to allow these qualifying institutions to allocate more resources to serving customers and contributing to local economies.
Mentorship for Small Financial Institutions
Another bill approved by the lawmakers is the Advancing the Mentor-Protege Program for Small Financial Institutions Act, sponsored by Rep. Joyce Beatty, D-Ohio. This bill aims to solidify the Treasury Department’s mentorship program that pairs smaller or rural financial institutions with larger firms. The mentorship program is designed to assist small lenders in developing the operational capacity and expertise required to qualify for government financial services work.
The TRUST Act
The third bill passed is the TRUST Act of 2025, which proposes to allow regulators to examine small, well-capitalized banks less frequently by raising the threshold for the 18-month exam cycle from $3 billion to $6 billion. According to French Hill, this modernization of outdated thresholds would prevent inflation and economic growth from unnecessarily increasing burdens on community institutions.
Responses and Future Implications
These bills have been well-received by advocates of community banks. The Independent Community Bankers of America (ICBA) and the nation’s community banks have expressed their strong support for the House’s passage of these bills. They believe this legislation will help community banks allocate more resources to serving their customers and communities. ICBA President and CEO Rebeca Romero Rainey commended House leadership and the House Financial Services Committee for prioritizing this bipartisan legislation and urged the Senate to quickly pass it.
The passage of these bills could potentially revolutionize the operational landscape for small banks. By reducing regulatory burdens and providing mentorship opportunities, these institutions could focus more on serving their local economies and customers. The forward look seems promising, but the ultimate decision now lies with the Senate.
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