Promoting New Bank Formation Act
The Promoting New Bank Formation Act seeks to make it easier for new and small depository institutions to form and grow. It would require federal banking agencies to implement a three-year phase-in for existing capital standards for depository institutions and their holding companies, starting when the bank becomes insured. The bill also provides a process for temporary deviations from approved business plans during the phase-in and creates an 8% Community Bank Leverage Ratio (CBLR) for rural depository institutions during the same three-year period, with lower phase-in ratios in the first two years. In addition, the bill expands agricultural lending authority for federal savings associations, and it directs a joint study by federal banking agencies on the factors limiting the number of de novo insured banks and how to promote them in underserved areas. Definitions align with existing federal banking definitions. In short, the bill is designed to reduce early capital and planning pressures on new and small rural banks, while broadening lending authority and pushing for more research into ways to foster new bank formation.
Key Points
- 1Phase-in for capital standards: Establishes a three-year period during which a depository institution or its holding company may gradually meet applicable Federal capital requirements, starting when the insured institution or its insured subsidiary becomes insured.
- 2Changes to business plans during phase-in: Allows a depository institution or its holding company to request deviations from an approved business plan during the three-year phase-in, with agency action required within 30 days (approval, conditional approval, or denial). If the agency does not act within 30 days, the request is deemed approved.
- 3Rural Community Leverage Ratio (CBLR) relief: During the same three-year period, rural depository institutions would have an 8% CBLR. The agencies would issue rules to phase in lower CBLR requirements during the first two years of this period. A rural depository institution is defined as having assets under $10 billion and being located in a rural area (per specified CFR criteria).
- 4Agricultural lending authority for federal savings associations: Amends the Home Owners’ Loan Act to explicitly authorize agricultural loans (secured or unsecured) and adjusts the list of permissible purposes for loans by federal savings associations, maintaining a pathway for business-related lending.
- 5Study on de novo insured depository institutions: Requires a joint study by federal banking agencies to identify why there have been few de novo insured banks in the prior decade and to propose ways to promote new de novo institutions in underserved areas, with a final report to Congress within one year of enactment.
- 6Definitions: Clarifies terms such as “appropriate Federal banking agency,” “depository institution,” “depository institution holding company,” “Federal banking agency,” and “insured depository institution” by reference to FDIC Act definitions.