U.S. Sen. Cindy Hyde-Smith (R-MS) and U.S. Rep. Andy Barr (R-KY) introduced a bill that seeks to increase the approval for new banks, particularly in rural and underserved areas.
The Promoting New Bank Formation Act, legislation that would ease federal regulatory restrictions and encourage the formation of “de novo” banks. It would do this by providing a three-year phase-in period during which newly chartered banks would be given time to meet less stringent capital requirements as they adapt to a business model that aligns with the needs and circumstances of the communities they serve.
“The availability of local capital and basic banking services is necessary to sustain and grow economic vitality, more so in rural communities. This legislation creates a pathway to chartering new banks for rural areas that continue to lose community banking options. I believe it is necessary because regulations intended to police big banking institutions are killing small town banking, which makes it harder to live and thrive in rural America,” Hyde-Smith said.
This legislation was written in response to the precipitous decline in new banks following the enactment of the Dodd-Frank Act in 2010. In 2007, 181 new bank charters were issued, but from 2010 to 2023, an average of fewer than six new charters were issued annually. Mississippi is among the many states, most rural, that haven’t seen any new banks chartered. The number of banking institutions in Mississippi has declined by 36 percent over just the last 15 years, dropping from 97 to 62.
“A strong and diverse banking system is essential for a healthy economy,” Barr said. “This legislation focuses on reducing barriers for new banks to form, preserving the community banking system, and ensuring that consolidation doesn’t limit access to financial services in underserved areas. By encouraging the creation of new institutions, we can strengthen competition, expand opportunities, and protect the financial system’s backbone—our community banks.”
The Mississippi Bankers Association (MBA), Independent Community Bankers Association (ICBA), and American Bankers Association (ABA) endorse the legislation.
“The nation’s community banks strongly support this important legislation from Representative Andy Barr and Senator Cindy Hyde-Smith to promote the creation of new community banks, especially in America’s rural areas,” ICBA President and CEO Rebeca Romero Rainey said. “Eliminating obstacles to de novo bank formation to fuel access to banking services in local communities is a critical piece of ICBA’s ‘Repair, Reform, and Thrive’ plan for the new 119th Congress and incoming Trump administration. We look forward to working with Representative Barr and Senator Hyde-Smith to advance this critical legislation.”