Banking and Finance Law Daily Wrap Up, COMMUNITY DEVELOPMENT—Public Citizen decries that Republican bank deregulation bill repeats past failures, (Mar 24, 2026)

By Colleen M. Svelnis, J.D.

The advocacy group warns that legislation like H.R. 7056, Community Bank Regulatory Tailoring Act could weaken banking safeguards and might lead to financial instability.

Consumer advocacy group Public Citizen is criticizing a new wave of Republican-backed bank deregulation, arguing it revives policy mistakes that preceded major financial crises, including the 2008 financial crisis, along with the savings-and-loan crisis of the late 1980s, and the 2023 bank failures. The analysis, published on the group’s website, refers specifically to H.R .7056, Community Bank Regulatory Tailoring Act, which was introduced in the House of Representatives and advanced out of the Financial Services Committee by a vote of 33-21.

H.R. 7056 was sponsored by Financial Institutions Subcommittee Chairman Andy Barr (R-Ky.) and indexes various asset-based thresholds for bank regulations to nominal gross domestic product for community banks and small credit unions and is intended to reduce unnecessary regulatory burdens that can limit lending and economic growth in local communities.

Public Citizen is urging lawmakers to reject the Act, saying the measure would change approximately 37 regulatory thresholds across the banking framework. The group argues that the bill significantly weakens Community Reinvestment Act (CRA) exams and mortgage disclosure requirements. The CRA, Public Citizen emphasizes, is intended to ensure banks reinvest in their communities, including populations that have been historically excluded from financial services. Regulators can block mergers when banks fail to meet these obligations. However, Public Citizen cites research showing that banks frequently make commitments during merger applications and then fail to deliver once approval is granted.

Public Citizen references the 2018 enactment of S. 2155, which raised the asset threshold for enhanced federal supervision from $50 billion to $250 billion. According to the group’s analysis, several regional banks rapidly expanded toward that new limit with insufficient oversight with “catastrophic” results, with three of the four largest bank failures in U.S. history occurring after the threshold change.

The group draws parallels to earlier crises. In the lead-up to the 2008 financial crash, regulators permitted widespread mortgage fraud and risky lending practices, fueling a housing bubble that ultimately collapsed into the Great Recession. In the 1980s, deregulation allowed savings-and-loan institutions to expand aggressively into commercial real estate and other ventures.

A central concern for Public Citizen is the bill’s use of nominal gross domestic product as an index to adjust regulatory thresholds over time. Because nominal GDP rises with inflation as well as real economic growth, the group argues this approach would steadily and automatically weaken oversight. Over the past 30 years, Public Citizen notes, the cost of living roughly doubled while nominal GDP tripled. As a result, banks previously viewed as systemically risky could be reclassified as “community” banks simply due to inflation-driven threshold increases.

The Community Bank Regulatory Tailoring Act is moving alongside other deregulatory measures, including the Main Street Capital Access Act, which has also advanced out of committee. Public Citizen says that legislation includes more than two dozen additional rollbacks, including provisions that allow banks to operate closer to insolvency. Another section would require supervision to be tailored not only to bank size but to each institution’s self-defined risk profile, a change Public Citizen warns could invite litigation against regulators and paralyze supervision.

The group also criticizes the provision that eliminates “reputational risk” as a supervisory consideration. Public Citizen argues that reputation directly affects bank operations and public trust, citing adverse media exposure faced by institutions associated with high-profile misconduct. Removing reputational risk, the group says, ignores practical realities and would ease merger approvals, further reducing the number of community-focused banks.

Companies: Public Citizen

LegislativeActivity: CommunityDevelopment FinancialStability PrudentialRegulation