Promoting New Bank Formation Act of 2025
The Promoting New Bank Formation Act of 2025 seeks to make it easier for de novo (new) banks, especially in rural areas, to form and operate by providing a temporary relief from certain federal capital requirements and by giving banks more flexible planning during their first three years after FDIC deposit insurance becomes effective. The bill also expands the lending authority of Federal Savings Associations to include agricultural loans and requires a government study on the factors behind the scarcity of new banks and ways to promote bank formation in underserved areas. The measure is sponsored in the Senate by Senator Cindy Hyde-Smith and was introduced in January 2025. In short, the bill aims to boost access to banking in rural and underserved communities by delaying full capital requirements for new institutions, offering a phased-in approach to leverage ratios, and enabling more adaptive business planning, while also broadening agricultural lending authority for certain savings institutions and prompting a study to identify barriers to new bank formation.
Key Points
- 13-year phase-in of federal capital standards for de novo financial institutions:
- 2- New banks would not have to meet full federal capital requirements for the first three years after their FDIC deposit insurance becomes effective.
- 3Relief and phased rules for rural community banks:
- 4- During the same 3-year window, rural community banks would face an 8% Community Bank Leverage Ratio (CBLR), with rules allowing lower percentages in the first two years as the ratio is phased in.
- 5Expanded agricultural lending authority for Federal Savings Associations:
- 6- The Act adds agricultural loans to the authority of Federal Savings Associations to make secured or unsecured loans for agricultural purposes.
- 7Changes to business plans for new banks:
- 8- Banks in the 3-year period can request deviations from their approved business plans, with a 30-day agency decision window. If the agency does not act within 30 days, the request is deemed approved.
- 9Study on de novo bank formation:
- 10- A joint study by federal banking agencies to identify reasons for low de novo bank formation and to identify ways to promote new banks in underserved areas, with a report to Congress within 1 year.