State Association Letter to the U.S. House of Representatives on H.R. 6955, the Main Street Capital Access Act

Dear Speaker Johnson and Minority Leader Jeffries:

The American Bankers Association (ABA) and the undersigned state bankers associations (together, "the Associations"), which collectively represent the thousands of banks across the country, write to urge timely floor consideration and strong bipartisan passage of H.R. 6955, the Main Street Capital Access Act. This legislation includes many provisions that our Associations have long supported, such as measures to spur new bank formation, tailor bank regulation, index key asset thresholds to keep pace with inflation, promote greater transparency and fairness in supervision, encourage healthy merger activity, ensure regulatory accountability, and other important issues. These common-sense reforms would promote economic growth in communities across the country through the promotion of a robust, dynamic banking industry and the effective intermediation of credit for individuals, families, and businesses of all sizes.

Community banks play a vital role in the economic health of the communities they serve, and incentivizing the creation of new banks is critical to promoting a robust, diverse banking industry nationwide. Yet bank consolidation is a long-term trend, in fact, there are 4,555 fewer banks in the U.S. now than in 2005. At the same time, community banks operate under a regulatory framework that too often fails to account for their size, risk profile, and business model. In addition to easing regulatory burdens on community banks, the bill would facilitate the formation of new banks in urban and rural areas. The Main Street Capital Access Act would be an important step toward expanding banking access for both individuals and small- and medium-sized businesses while allowing community banks to focus on serving their customers.

Further, the bill would strengthen community development financial institutions, which play a critical role in expanding economic opportunity in underserved rural, urban, and Native communities. Equally important, this legislation would advance common-sense regulatory tailoring by aligning prudential regulation and supervision with banks’ capital structure, risk profile, complexity, activities, business model, and size, while indexing key regulatory thresholds so that such tailoring remains meaningful over time. Indexing is a low-cost, high-impact, and durable reform that improves transparency, reduces arbitrary burden, and allows regulators to focus on actual risk.

The bill would also promote fair and transparent supervision by strengthening removal of reputational risk as a component of bank supervision, improving the process for institutions to appeal supervisory determinations, and ensuring a prompt review of Material Supervisory Determinations, all of which are important steps that contribute to the long-term health of the banking industry. The Associations likewise support the bill’s provisions that would ensure greater accountability at the federal banking agencies. In testimony and other communications with Congress and policymakers, we have shared our member banks’ concerns about the cumulative impact of uncoordinated regulatory initiatives and the misuse of regulatory guidance by the regulatory agencies.

Beyond regulation and supervision, ensuring that banks have stable sources of funding through all stages of the economic cycle is critical to the seamless provision of financial services, and the Associations support the bill’s provisions to modernize the Federal Reserve's Discount Window, strengthening its effectiveness as a reliable liquidity backstop and reinforcing its role in promoting financial system stability. The legislation would also update outdated standards for assessing the competitive impact of bank mergers while requiring timely determinations on merger applications and provide banks with greater flexibility to make long-term investments in businesses of all sizes.

Finally, we commend the House Financial Services Committee for thoughtfully approaching the study and improvement of the bank resolution framework, a concept consistent with the recommendations published in the ABA Deposit Insurance Task Force Report.2 Our member banks strongly believe that increasing the spectrum of institutions permitted to bid on failed institutions would expand the pool of participants, increase competition, and further protect the Deposit Insurance Fund against losses.

Taken together, this important package of community bank regulatory reforms would enable banks across the country to better serve their customers and communities, making life more affordable for Americans and empowering Main Street. We strongly urge House leadership to bring the Main Street Capital Access Act to the floor without delay and ask all members to support its timely passage in a strong, bipartisan fashion. The Associations look forward to continuing to work with Congress and the Administration to pass and implement these and other important reforms that promote a safe, sound, and competitive banking system, while helping communities across the country continue to grow and thrive.

Sincerely,