The Main Street Capital Access Act (H.R. 6955), introduced in the 119th Congress by House Financial Services Committee Chairman French Hill (R-AR) and Subcommittee on Financial Institutions Chairman Andy Barr (R-KY), represents a comprehensive effort to modernize and streamline federal banking regulations, with a particular focus on bolstering community banks and enhancing access to capital for local economies. The legislation consolidates several previously proposed measures into a single package aimed at reducing regulatory burdens, promoting new bank formations, and fostering innovation while maintaining safeguards for financial stability.

At its core, the act is structured across eight titles, each addressing specific pain points in the banking sector:

• Title I: New Bank Formation and Local Community Access – Eases capital requirements for de novo (newly formed) banks with a three-year phase-in period and lowers the Community Bank Leverage Ratio (CBLR) for rural institutions. It also mandates annual reporting on charter applications and studies ways to revitalize rural depositories.
• Title II: Tailoring Bank Regulation – Adjusts regulations based on a bank’s risk profile and size, raising thresholds for small bank holding companies and enhancing flexibility in leverage ratios.
• Title III: Fair and Transparent Bank Supervision – Reforms the CAMELS rating system for objectivity, establishes independent reviews of supervisory decisions, and streamlines exams for smaller, well-managed banks.
• Title IV: Regulatory Accountability and Transparency – Strengthens FDIC board governance, clarifies that guidance lacks legal force, increases regulatory review frequency, and requires reporting on international regulatory interactions.
• Title V: Strengthening Local Bank Funding – Modernizes the Federal Reserve’s discount window, expands exemptions for reciprocal and custodial deposits from being classified as brokered.
• Title VI: Promoting Bank Competition and Merger Clarity – Simplifies merger reviews for smaller institutions by removing certain competition considerations and mandating studies on merger procedures.
• Title VII: Strengthening Transparency and Involvement in Bank Resolutions – Provides FDIC flexibility in resolutions and studies historical tools like shelf charters.
• Title VIII: Facilitating Innovation and Bank Partnerships – Extends merchant banking investment periods and mandates a study on bank-fintech partnerships (detailed below).
  
  

For the banking industry, this act signals a shift toward a more proportionate regulatory environment, particularly benefiting community banks with assets under $10 to 25 billion. By easing capital hurdles and supervisory burdens, it could spur new bank charters, which are at a historic low since the 2008 financial crisis, leading to greater competition, improved credit access for small businesses and rural areas, and enhanced economic growth on Main Street. However, it also raises questions about potential risks if deregulation leads to weaker oversight, echoing concerns from past crises. Overall, it aims to balance innovation and competition with stability, potentially revitalizing community banking while adapting to fintech disruptions.

The Bank-Fintech Partnership Study

Section 802 of the Main Street Capital Access Act directs the Federal Reserve Board (FRB), Federal Deposit Insurance Corporation (FDIC), and Office of the Comptroller of the Currency (OCC) to jointly conduct a comprehensive study on bank-fintech partnerships, assessing their impacts on competition, innovation, consumer protection, and the availability of financial products and services. This provision recognizes the growing interdependence between traditional banks and fintech firms, where collaborations, such as Banking-as-a-Service (BaaS) models, enabled faster product delivery, embedded lending and/or digital payments. The study’s meaning lies in its intent to provide data-driven insights into these arrangements, highlighting benefits like expanded access to underserved markets and accelerated tech adoption, while identifying risks such as regulatory arbitrage, data privacy vulnerabilities, or systemic exposures from third-party dependencies. For the industry, it paves the way for more informed policymaking, potentially leading to tailored guidelines that encourage safe partnerships, reduce compliance uncertainties, and foster a competitive landscape where banks can leverage fintech without undue regulatory friction, ultimately enhancing resilience and consumer choice in a digital-first economy.

A Double-Edged Sword for Banks

As the banking sector continues to adapt to changing conditions, the introduction of the Main Street Capital Access Act (H.R. 6955) represents a significant development for community financial institutions. This legislative proposal aims to remove outdated regulatory barriers that have constrained growth since the post-2008 period, offering the potential for renewed opportunities among local lenders. However, like any major policy reform, it presents both significant opportunities and potential risks that must be carefully considered by banking professionals.

The Act’s focus on facilitating de novo bank formations through phased capital requirements and reduced leverage ratios may revitalize underserved markets by enabling new charters tailored to community needs. Such measures could increase competition, thereby reducing costs for small businesses and individual consumers. Additionally, Titles II and V propose to calibrate regulations according to risk profiles and update funding mechanisms such as the discount window. These provisions are intended to improve the competitiveness of smaller banks relative to fintech firms and larger institutions. Ultimately, the legislation seeks to expand capital access at the community level, supporting innovation and stability while potentially enhancing profitability and market share for institutions with assets under $25 billion.

Yet, the ramifications are not all rosy. Deregulation, while liberating, risks echoing the excesses of past cycles, think loosened merger reviews under Title VI that could consolidate power among mid-tier banks, squeezing true community banks. If supervisory reforms in Title III dilute oversight too far, we might see a resurgence of “reputational risk” blind spots or unaddressed vulnerabilities in an increasingly digital threat landscape. Bankers should brace for uneven implementation, where larger community banks thrive while the smallest struggle with compliance gaps.

Then there’s Section 802, the act’s nod to bank-fintech partnerships, a study mandated for the FRB, FDIC, and OCC to dissect their effects on competition, innovation, consumer safeguards, and product availability. For bankers, this isn’t just academic; it’s a roadmap to the future. The provision underscores the reality that fintech collaborations, from BaaS platforms to embedded finance, are no longer optional but essential for survival. A well-executed study could yield guidelines that mitigate risks like third-party failures or data breaches, paving the way for symbiotic relationships that expand reach without eroding trust. However, if findings highlight systemic flaws, it might invite heavier scrutiny, raise compliance costs and slow adoption.

As this Act unfolds, community bankers would do well to engage with this act proactively,  advocate for balanced execution, invest in robust risk frameworks, and leverage emerging insights from the fintech study. The Main Street Capital Access Act is not a magic bullet, but it offers a framework to rebuild resilience amid disruption. The key lies in turning potential challenges into strategic advantages, ensuring local banking remains the backbone of American prosperity.

Paul Schaus is the President, CEO, and Founder of CCG Catalyst, a leading consulting firm specializing in bank and fintech strategies. With over 30 years in the industry, he advises on digital transformation, partnerships, and innovation. Contact him on LinkedIn.