Full Committee Highlights Policy Alignment with Prudential Regulators

Yesterday, the House Committee on Financial Services, led by Chairman French Hill (AR-02), held a hearing to examine the prudential regulators' efforts to tailor regulatory frameworks to today's financial system while promoting economic growth, maintaining financial stability, and fostering innovation, and showcased how the Main Street Capital Access Act complements those efforts.

On Regulatory Tailoring and Capital Reform:

Chairman Hill said, “Prudential regulation should foster economic opportunity, support responsible lending, and encourage long-term growth while maintaining confidence in our banking system. A sound prudential framework must have transparent, appropriately tailored regulations that are clear, efficient, and proportionate to the size, complexity, and risk profile of an institution.”

Subcommittee on Financial Institutions Chairman Andy Barr (KY-06) said, “Ensuring a risk focused regulatory system also requires tailoring requirements appropriately to the financial institution's size and risk profile. I'm glad to see that the regulators listened to bipartisan calls from this committee and apply these principles in their agencies, including and recently, Basel III re-proposal."

Majority Whip Tom Emmer (MN-06) said, “… I believe this updated [Basel III] proposal is in a much better place today than it was two and a half years ago. One of those improvements is the continued focus on tailoring, recognizing that not all institutions pose the same level of risk, and that regulatory frameworks should differ in size, complexity, and business model."

Subcommittee on Capital Markets Chairman Ann Wagner (MO-02) said, “U.S. Banks play an essential role in our capital markets, not just as lenders but as securities underwriters, liquidity providers, and through other market making activities. These institutions keep capital flowing and help ensure that borrowing costs are stable for families and businesses across the country, including my home state of Missouri. When the original 2023 Basel III endgame proposal was released, many of us raised alarms that significant increases in capital requirements would have had drastic consequences for everyday Americans.”

On Regulatory Burdens and Expanding Access to Credit:

Full Committee Vice Chairman Bill Huizenga (MI-04) said, “It's been more than three years since the failure of Silicon Valley Bank, which was regulated at the federal level by the Federal Reserve System. The Biden Administration had a limited review regarding the failure... It was used to justify a slew of misguided regulatory proposals that not only punished all the rest of the banks that actually acted as sources of strength during the fallout, but also proposed to impose burdens on banks in ways that had nothing to do with SVB’s failure.”

Subcommittee on Housing and Insurance Chairman Mike Flood (NE-01) said, “I sent a letter with Senator Ricketts back in February requesting that you all address the cap on mortgage servicing assets as applied to the common equity tier one formula for banks across the country. This cap is a significant barrier, particularly for smaller banks that have very little capacity to participate in mortgage servicing. With the cap, I was very pleased to see that the current proposal removes the mortgage servicing deduction entirely, and I do believe that this change will make it easier for institutions, both large and small, to participate in mortgage servicing.”

Rep. Tim Moore (NC-14) said, “Last November, committee Republicans sent a letter to the federal banking agencies to ask that you undertake rulemaking to index the regulatory thresholds for the application of enhanced prudential standards, which are based on four categories of institutions. The Senate Banking Committee sent a similar letter earlier this year. Back in 2019, your agencies indicated that they plan to reevaluate these thresholds periodically through the notice and comment process, but that hasn't happened since they were originally sent seven years ago, which underscores the need to index these thresholds moving forward.”

Witnesses Echoed the Work of the Committee:

The Honorable Michelle Bowman, Vice Chair for Supervision, Board of Governors of the Federal Reserve System said, “The oversight of community banks remains a priority for the Federal Reserve. These banks serve as critical sources of credit in their communities, providing essential financial support to families, businesses, and the local economy. The Federal Reserve’s supervisory and regulatory framework must be appropriately calibrated to support growth while maintaining safety and soundness. The federal banking regulators also finalized reforms to the community bank leverage ratio (CBLR) framework. A broader range of qualifying banks can now use a simple leverage ratio to measure capital adequacy instead of the complex risk-based capital framework. This rule calibrates the CBLR consistent with the statute at 8 percent and extends the grace period for banks to return to compliance from two to four quarters. These changes ensure the simplified framework is accessible to more community banks, and that it works as Congress intended.”

The Honorable Jonathan Gould, Comptroller of the Currency, said, “We are hardwiring the foundations of supervision, such as the definition of unsafe and unsound practices, into regulation, and are reviewing past supervisory criticisms and enforcement actions to ensure alignment with our standard for material financial risk. But we, like the banking system itself, must always look towards the future. Our job is to facilitate, not stymie, responsible innovation. We are working to respond to comments on our GENIUS Act proposal and finalize it. Just as the National Bank Act brought an end to the “wildcat” banking of the 1800s, the GENIUS Act and our rule will help ensure appropriate consumer protections for stablecoin users.”

The Honorable Kyle Hauptman, Chairman, National Credit Union Administration, said, “As digital currency and stablecoins reshape the global financial system, credit unions have an opportunity to embrace this transformation from a solid foundation of safety and soundness. Stablecoins can make payments faster, cheaper, and more inclusive. On May 15, 2026, we announced a proposed rulemaking for permitted payment stablecoin issuer standards, our second rulemaking required under the GENIUS Act. This proposed rule puts credit unions on equal footing with banks. Credit unions are well poised to benefit from this long-overdue update to America’s payment ecosystem. As stablecoins are more widely adopted, we Americans may no longer be made fun of for speaking about how many “business days” a payment will take to settle. Every day is a business day with stablecoins. All 365 days of the year, and all 24 hours of the day are equal in terms of sending payments. Tax refunds may eventually arrive on Sundays or holidays. And if we ever have a repeat of the COVID outbreak in March 2020, Americans should be able to receive emergency stimulus funds in a more timely and secure manner.”

The Honorable Travis Hill, Chairman, Federal Deposit Insurance Corporation, said, “For over a year, we have been reforming supervision to focus on material financial risks rather than on process-oriented, check-the-box requirements. The FDIC is implementing a number of changes to effectuate these reforms. These efforts are culminating in a more effective and efficient supervisory framework while continuing to support the safety and soundness and resiliency of individual institutions and the system overall.”

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