Promoting New Bank Formation Act
This bill lowers financial and regulatory hurdles for people looking to open new community and rural banks. For their first three years in business, newly formed banks would be allowed to gradually build up their required emergency cash reserves rather than meeting full standards on day one. The measure also allows federal savings associations to offer more farm loans and requires federal regulators to decide on a new bank's proposed business changes within 30 days.
What this bill touches.
Who it helps · who it burdens.
Who it helps
- Newly insured depository institutions and holding companiesReceives a 3-year phase-in period to comply with federal capital requirements and gains the ability to modify agency-approved business plans under an expedited 30-day review timeline that defaults to automatic approval if the agency fails to act (Sec. 2, Sec. 3).
- Newly insured rural depository institutionsSubject to a lower Community Bank Leverage Ratio requirement of 8 percent during their first three years of insurance, with even lower phased-in percentages during their first two years (Sec. 4).
- Federal savings associationsAuthorized to make secured or unsecured agricultural loans without being restricted by general commercial lending asset limits (Sec. 5).
Who it burdens
- Federal banking agenciesMandated to issue phase-in regulations for capital standards and rural leverage ratios, review and respond to business plan changes within 30 days (including providing written reasons and alternative remedies if denied), and conduct a study on the decline of newly chartered institutions to submit to Congress within one year (Sec. 2, Sec. 3, Sec. 4, Sec. 6).
The provisions, in plain language.
Requires federal banking agencies to issue rules giving newly insured banks and bank holding companies a three-year phase-in period to meet federal capital requirements.
Allows a new bank to request changes to its agency-approved business plan during its first three years, requiring regulators to decide within 30 days—including reasons and suggested revisions if denied—or the request is automatically approved.
Sets the Community Bank Leverage Ratio for qualifying new rural banks with under $10 billion in assets at 8 percent during their first three years, with even lower ratios phased in during the first two years.
Authorizes federal savings associations to make secured or unsecured agricultural loans without standard commercial lending limits.
Directs federal banking agencies to study the causes of the decline in newly chartered banks over the past decade and report strategies to Congress within one year for promoting new banks in underserved areas.