Bank deregulation package inches toward House floor

• Key insight: The community bank tailoring package could be on the House floor as early as tomorrow. 
• Forward look: The bill faces significant hurdles in the Senate, however, where it will need 60 votes — including several Democrats — just as the heated midterm election season gets under way. 
• What’s at stake: The legislation includes a number of bills that banks want, including provisions to index certain regulatory thresholds and discrete changes to the bank resolution process. 

WASHINGTON — A package of bank oversight reform bills aimed at easing regulations for small banks is moving closer toward a full vote in the House ahead of Congress’ August recess. 

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The package, known as the Main Street Capital Access Act, represents a substantial chunk of the vision laid out by House Financial Services Committee Chairman Rep. French Hill, R-Ark., in his “Make Community Banking Great Again” legislative push. While many of the provisions outlined in that broader package are not in this bill and have a long road to travel before becoming law, the Main Street Capital Access Act would still represent a significant step forward for certain bipartisan issues that are important to small and large institutions alike. 

Some of those include bills that aim to spur de novo bank formation, raise thresholds under which banks can qualify for less stringent oversight and create exceptions to the least-cost resolution framework for failed banks. Another measure in the package would require that bank regulatory thresholds tied to asset size be indexed to inflation and periodically adjusted. Yet another provision in the bill would make criteria for the management component of banks’ CAMELS ratings reviewable. 

The legislation is going through a Rules Committee vote today, where the powerful panel will decide how and when the package can get floor time. It previously passed the House Financial Services Committee in a 26-16 vote, largely along party lines. 

Committee aides said that debate is tentatively scheduled on the House floor tomorrow, but that can change quickly based on the House schedule and competing priorities for lawmakers. The aides said that they have made changes to get some Democrats’ votes, including technical changes to a bill that would index thresholds for some community bank oversight and another that would allow regulators to pursue supervisory penalties and other actions against banks that are going through a revamped appeals process. 

In another change from the version passed in the House Financial Services Committee, the package would lower the amount of discretionary funds that could be held at Federal Reserve banks. 

While many of these provisions are unlikely to get 60 votes in favor in the Senate, the package includes a number of provisions that are bipartisan, and that could get picked as riders on other packages, even if one or both chambers of Congress are flipped after the midterm elections. A House floor vote and debate puts lawmakers on the record as either supporting or opposing these measures, and works through technical changes with Democratic lawmakers to get more widely supported text. 

Rep. Bill Foster, D-Ill., said at the markup earlier this year that while he didn’t support the package then, he wants to work on some of the provisions in the future. 

“I will direct my staff to continue working and negotiating as this moves towards the floor,” he said. “If it succeeds in the house and dies in the Senate — which is very common around here — then a lot of the things in this package are things that I think we should pick up and continue to work on in the next Congress.”

The legislative calendar is tight for this package to advance to the Senate, especially with many bank deregulation bills unconsidered by the Senate Banking Committee. These last few weeks before Congress’ August recess are the last realistic chance for legislation to be considered in either chamber, since many lawmakers will go back to their districts to campaign after the recess begins. 

A couple of provisions could be considered under suspension of the rules in the House, which limits debate and paves the way for quick passage of uncontroversial legislation. Those include a bill that would allow well-managed and well-capitalized banks under $6 billion to alternate limited-scope examinations; one that would require the Federal Reserve Board to review its discount window program and submit suggestions to Congress; and another that would tighten requirements for bank regulators to allow a large bank to acquire a failed bank.