French Hill Advocates for Community-Bank Deregulation
U.S. Representative French Hill, R-Ark., who serves as the Chairman of the House Financial Services Committee, has put forward a legislative package promoting deregulation for community banks. The proposal, which was introduced on Wednesday, includes several components that have been longed for by the banking industry. However, with a tight legislative calendar, there are concerns about the possibility of passing the package in both chambers before the midterm campaigning gains momentum.
Key Components of the Deregulation Package
The proposed package incorporates numerous items that have been on the wish list of bankers. These include the tailoring of provisions, removing or narrowing down the “management” component from examinations, and preventing bank examiners from using the concept of reputational risk. Furthermore, it plans to make stress testing more standardized and raise some regulatory size thresholds. There are also proposed changes to the definition of when a deposit is regarded as “brokered.”
Implications and Anticipations
Hill, along with other House Financial Services Committee Republicans, particularly Rep. Andy Barr, R-Ky., who is co-sponsoring the package, plans to introduce the bill this week. They are also expected to request House leadership to consider it for floor time. Hill emphasized the importance of conversations and suggestions from other side of the aisle.
He expressed his hopes that the package would clarify the ideas in the 2018 bill, S. 2155, which gave regulators the flexibility to tailor regulations. Hill believes that this would limit regulators’ ability to roll back tailoring.
However, the proposed package does not cover all areas favored by the banking industry. It does not address the deposit-insurance debate, including any increases in the deposit-insurance limit or the revival of the Transfer Admission Guarantee program. Moreover, the package does not take into account strengthening the prohibition of stablecoin issuers offering yield-like products.
Addressing the Debanking Issue
While the bill does include a section on debanking, it only restricts regulatory agencies from using reputation risk as a supervision component. It does not address the issue of fair access among the banks. Hill mentioned that he does not currently plan to target fair access within banks, but he might consider it in the future if compelling cases arise from regulatory investigations.
In conclusion, the proposed package aims to address several issues concerning community banks, aiming for a safer, sounder banking system. While it is eagerly awaited by bankers, its passage will depend on the legislative calendar and the receptivity of the House leadership.
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