When Kentuckians look to apply for a mortgage or a small business loan, they often turn to someone they know at their local community bank or credit union. These small financial institutions — there are more than 100 throughout the Commonwealth — are focused on their own neighborhoods, helping to grow the economy and provide a critical service to their customers. But for the past eight years, these community institutions have suffered from Washington’s heavy-handed federal regulations forced upon them under the 2010 “Dodd-Frank Act.” As a result, these small lenders are spending nearly a quarter of their net income on compliance costs alone. Having heard directly from many small banks in Kentucky struggling to keep their doors open, I have been determined to help provide relief.
Since President Trump took office, he has been working with this Republican-led Congress to slash Washington’s overreaching regulations and get the economy back on track. After eight years of the Obama administration forcing one-size-fits-all edicts, Kentuckians needed a change. From coal to agriculture, we are cutting back the red tape to help families succeed and small businesses and jobs grow. Now, Congress and the president are working together to deliver much-needed assistance to our community banks and credit unions so they can provide more capital and financial flexibility for communities across the Commonwealth.
That’s why a bipartisan group of lawmakers introduced “The Economic Growth, Regulatory Relief, and Consumer Protection Act.” After years of study, input, and hard work, this bill represents commonsense reform that will help community banks and credit unions — and most importantly — the millions of Americans who depend on them. I am proud not only to support this legislation on behalf of Kentucky’s small lenders who fulfill a vital role in our communities, but also to have used my position as Senate Majority Leader to prioritize it on the Senate floor.
It’s important to remember that these aren’t the giant banks of Wall Street, and Washington shouldn’t try to regulate them in the same way. These are the community institutions that help thousands of Kentuckians pursue their dreams. In this era of online banking and multinational corporations, smaller institutions remain uniquely able to build community connections. Across the country, it is local financial institutions that fund the majority of small business loans and more than 80 percent of agricultural loans. It’s time under a new administration and a Republican-led Congress that our laws and regulations recognize the essential role that community banks and credit unions play in our small and rural communities.
When these small financial institutions are saddled with needless requirements and regulatory overreach, it’s their customers — hardworking Kentuckians looking to purchase a home or get a loan to jumpstart their small business — who shoulder the greatest burden. If Main Street banks can’t afford the compliance costs from the Obama-era regulatory regime, they’ll have to shut down. That leaves Kentucky communities without their trusted local bank and less financial capital in their communities.
One study showed that one bank closure would cut the number of new small business loans in an area by more than 10 percent for several years. Unfortunately, in many low-income areas, the problem is even worse. When a bank closes in one of these communities, lending to local small businesses can be cut by nearly 40 percent. Vulnerable Kentuckians need local lenders, and I am proud that this legislation will help these institutions and their customers.
Our bipartisan bill will right-size the rules so they make sense for rural financial institutions, while continuing to protect our nation’s strong financial system. By reducing the compliance burden, these community organizations will be able to pass along savings to Kentucky families and workers.
I am proud that this commonsense reform bill will support Kentucky’s strong tradition of community banking. With the endorsement of the several community banks, credit unions, and small business groups in Kentucky and across the nation, I look forward to the House of Representatives passing the bill and President Trump signing it into law soon. Delivering this relief to community lenders will help grow local economies and provide services to Kentuckians who need them most.
Mitch McConnell, a Republican, is Kentucky’s senior Senator and the Senate Majority Leader.