Bill Summary
The "Promoting New Bank Formation Act of 2025" aims to address the declining number of de novo (newly established) financial institutions, particularly in underserved rural and urban communities. It establishes a three-year phase-in period for these institutions to comply with federal capital standards, thus easing the regulatory burden on new banks as they get established.
Key provisions of the legislation include:
1. **Phase-In Period**: Newly formed banks will have a three-year period to meet federal capital requirements, starting from when they obtain deposit insurance from the FDIC.
2. **Business Plan Flexibility**: During this phase-in period, these banks can request modifications to their approved business plans, with a mandatory review process by federal banking agencies.
3. **Community Bank Leverage Ratio**: Rural community banks will have a temporary Community Bank Leverage Ratio set at 8%, with lower requirements in the initial two years of the phase-in.
4. **Agricultural Loan Authority**: The Act expands the authority of federal savings associations to include agricultural loans.
5. **Study and Report**: Federal banking agencies are tasked with studying the reasons behind the decline in new financial institutions and proposing strategies to encourage their formation, particularly in areas lacking adequate banking services.
Overall, this legislation seeks to revitalize the formation of new banks to enhance access to banking services in communities that have been adversely affected by bank closures and consolidation.
Possible Impacts
The "Promoting New Bank Formation Act of 2025" could affect people in several ways. Here are three examples:
1. **Increased Access to Banking Services**: By facilitating the establishment of new banks, particularly in underserved rural and urban areas, the legislation aims to improve access to essential banking services. This could benefit individuals and small businesses in these communities who may currently rely on distant or less favorable banking options, thereby promoting financial inclusion and economic development.
2. **Support for Local Economies**: The act's provisions, such as the 3-year phase-in period for capital requirements, are designed to ease the financial burden on new banks, especially rural community banks. This could lead to more locally focused financial institutions that are better positioned to understand and serve the specific needs of their communities, ultimately supporting local economies and job creation.
3. **Enhanced Loan Opportunities**: The amendment allowing federal savings associations to provide agricultural loans can directly benefit farmers and agricultural businesses in rural areas. By expanding access to credit for agricultural purposes, the legislation could enable these businesses to invest in equipment, land, and operations, contributing to greater agricultural productivity and sustainability in rural communities.
[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[S. 113 Introduced in Senate (IS)]
<DOC>
119th CONGRESS
1st Session
S. 113
To require the appropriate Federal banking agencies to establish a 3-
year phase-in period for de novo financial institutions to comply with
Federal capital standards, to provide relief for de novo rural
community banks, and for other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
January 16, 2025
Mrs. Hyde-Smith introduced the following bill; which was read twice and
referred to the Committee on Banking, Housing, and Urban Affairs
_______________________________________________________________________
A BILL
To require the appropriate Federal banking agencies to establish a 3-
year phase-in period for de novo financial institutions to comply with
Federal capital standards, to provide relief for de novo rural
community banks, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Promoting New Bank Formation Act of
2025''.
SEC. 2. FINDINGS.
The Congress finds the following:
(1) Trends in bank closures and consolidation have left
many communities without access to banking services and
disproportionately impact underserved rural and urban
communities.
(2) De novo bank formation has slowed significantly
following the financial crisis.
(3) A November 2019 report by the Federal Reserve System
found that 44 counties in the United States were ``deeply
affected'' by trends in bank closures and consolidation,
meaning that the counties had fewer than 10 branches in 2012
and lost not less than 50 percent of them by 2017.
(4) 89 percent of the deeply affected counties described in
paragraph (3) were rural.
(5) Rural counties deeply affected by branch closures had
higher poverty rates and lower median incomes, and a higher
share of their population were African-American compared to all
rural communities.
SEC. 3. DEFINITIONS.
In this Act:
(1) Appropriate federal banking agency; depository
institution; depository institution holding company.--The terms
``appropriate Federal banking agency'', ``depository
institution'', and ``depository institution holding company''
have the meanings given those terms in section 3 of the Federal
Deposit Insurance Act (12 U.S.C. 1813).
(2) Community bank leverage ratio.--The term ``Community
Bank Leverage Ratio'' has the meaning given that term under
section 201(a) of the Economic Growth, Regulatory Relief, and
Consumer Protection Act (12 U.S.C. 5371 note).
(3) Financial institution.--The term ``financial
institution'' means a depository institution or depository
institution holding company.
(4) Rural community bank.--The term ``rural community
bank'' means a financial institution--
(A) with total consolidated assets of less than
$10,000,000,000; and
(B) located in a rural area, as defined in section
1026.35(b)(2)(iv)(A) of title 12, Code of Federal
Regulations, or any successor regulation.
SEC. 4. PHASE-IN OF CAPITAL STANDARDS.
The appropriate Federal banking agencies shall issue rules that
provide for a 3-year phase-in period for a financial institution to
meet any Federal capital requirements that would otherwise be
applicable to the financial institution, where the 3-year period begins
on the date on which the deposit insurance that the financial
institution has obtained from the Federal Deposit Insurance Corporation
becomes effective.
SEC. 5. CHANGES TO BUSINESS PLANS.
(a) In General.--During the 3-year period beginning on the date on
which the deposit insurance that the financial institution has obtained
from the Federal Deposit Insurance Corporation becomes effective, a
financial institution may request to deviate from a business plan that
has been approved by the appropriate Federal banking agency by
submitting a request to the agency pursuant to this section.
(b) Review of Changes.--An appropriate Federal banking agency
shall, not later than the end of the 30-day period beginning on the
receipt of a request under subsection (a)--
(1) approve, conditionally approve, or deny the request;
and
(2) notify the financial institution of the decision and,
if the agency denies the request--
(A) provide the financial institution with the
reason for the denial; and
(B) suggest changes to the request that, if
adopted, would allow the agency to approve the request.
(c) Result of Failure To Act.--If an appropriate Federal banking
agency fails to approve or deny a request within the 30-day period
required under subsection (b), the request shall be deemed to be
approved.
SEC. 6. RURAL COMMUNITY BANK LEVERAGE RATIO.
(a) In General.--During the 3-year period beginning on the date on
which the deposit insurance that a rural community bank has obtained
from the Federal Deposit Insurance Corporation becomes effective, the
Community Bank Leverage Ratio for the rural community bank shall be 8
percent.
(b) Phase-In Authority.--The appropriate Federal banking agencies
shall issue rules to phase-in the Community Bank Leverage Ratio
described in subsection (a) with respect to a rural community bank by
setting lower Community Bank Leverage Ratio percentages during the
first 2 years of the 3-year period described in subsection (a).
SEC. 7. AGRICULTURAL LOAN AUTHORITY FOR FEDERAL SAVINGS ASSOCIATIONS.
Section 5(c) of the Home Owners' Loan Act (12 U.S.C. 1464(c)) is
amended--
(1) in paragraph (1), by adding at the end the following:
``(V) Agricultural loans.--Secured or unsecured
loans for agricultural purposes.''; and
(2) in paragraph (2)(A), by striking ``business, or
agricultural'' and inserting ``or business''.
SEC. 8. STUDY ON DE NOVO FINANCIAL INSTITUTIONS.
(a) Study.--The appropriate Federal banking agencies shall,
jointly, carry out a study on--
(1) the principal causes for the low number of de novo
financial institutions in the 10-year period ending on the date
of enactment of this Act; and
(2) ways to promote more de novo financial institutions in
areas currently underserved by financial institutions.
(b) Report to Congress.--Not later than 1 year after the date of
enactment of this Act, the appropriate Federal banking agencies shall,
jointly, issue a report to Congress containing all findings and
determinations made in carrying out the study required under subsection
(a).
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