Senate Urged to Advance Regulatory Relief for Community Banks

The House passed the bill in July with bipartisan support, achieving a vote of 270 to 155, but its progress has stalled in the Senate. The hearing, held at Eastern Kentucky University's Center for the Arts, aimed to exert pressure on Congress to vote on the legislation before its recess.

The proposed Main Street Capital Access Act seeks to adjust federal oversight of community banks by linking capital requirements to inflation, gradually implementing rules for new banks, and tailoring regulations according to risk rather than bank size. The bill has the backing of the Trump administration.

However, the hearing raised concerns regarding its impartiality, as all witnesses supported the legislation without any representatives from consumer advocacy groups or federal regulators who might oppose such deregulation or highlight potential systemic risks.

During the hearing, Timothy Schenk, President and CEO of the Kentucky Bankers Association, stated that regulatory costs disproportionately burden community banks, advocating for a higher asset limit for enhanced prudential standards and a streamlined examination process. Kyle Aud highlighted his struggles during the bank chartering process, cautioning that excessive regulatory consolidation hampers competition and innovation in local financial services.

Jason Hawkins, CEO of First United Bank, remarked that the current regulatory landscape is far more challenging for new banks than it was when he started his institution in 1996. He called for capital rules that acknowledge the lower systemic risks associated with community banks. Zach Worsham, Vice President of Winterwood Inc., also shared concerns about regulatory constraints affecting financing for construction and development projects.

The hearing illustrated the ongoing trend of bank consolidation, with the number of banks decreasing by 4,555 from 2005 to 2026. Despite community banks holding only about 15 percent of total banking assets, they are responsible for nearly 40 percent of all small business loans and remain essential in many rural areas of Kentucky.

Rep. Andy Barr, the Kentucky Republican chairing the subcommittee, criticized federal regulators for applying rules as if all banks are large institutions. He emphasized that regulations should depend on a bank's risk profile, not its size.

In 2026, regulators finalized a rule that lowered the Community Bank Leverage Ratio to 8 percent. A coalition of the American Bankers Association and 52 state bankers associations has pushed for the House bill's passage, which boasts support from over 100 organizations. However, no floor votes or markup sessions in the Senate have been scheduled yet, with 56 Democrats voting for the House version and 154 against it.

Barr urged the Senate to act before Congress adjourns, emphasizing community banks' critical role in funding various local enterprises. The hearing's lack of diverse witness representation prompted questions about the balance and fairness of the testimony presented.