Merchant Banking Modernization Act

The Merchant Banking Modernization Act aims to update the Bank Holding Company Act of 1956 by increasing the maximum duration that financial holding companies can own stakes in non-financial businesses. Currently, federal regulations generally require these banks to sell off such investments within 10 years. This bill would extend that mandatory divestiture window to at least 15 years for both new and existing investments.

If enacted, the proposal would allow banks to provide longer-term capital to startups and small businesses, particularly those in rural areas that may require more than a decade to become stable and profitable. Proponents argue that the current 10-year limit forces banks to exit investments prematurely, which can discourage them from funding complex or slow-growing projects. By providing an additional five years, the bill seeks to encourage more sustained financial support for local economies and job creation.