Promoting New Bank Formation Act

Bill Number

H.R. 478

Origin Chamber

House

Congress

119th Congress, Session 1

Policy Area

Finance and Financial Sector

Status

Introduced

Latest Action

2025-05-06: Placed on the Union Calendar, Calendar No. 64.

Last Updated

2026-05-02T19:06:20Z

AI-Generated Summary

Purpose of the Legislation

The Promoting New Bank Formation Act (H.R. 478) aims to encourage the creation of new banks, particularly in rural and underserved areas, by reducing initial regulatory hurdles. It provides temporary relief from certain federal capital and operational requirements for newly formed (de novo) insured depository institutions, which are banks or similar entities insured by the federal government.

Key Provisions

• Phase-In of Capital Standards (Section 2): Federal banking agencies (such as the Federal Reserve, FDIC, and OCC) must create rules allowing a 3-year gradual implementation period for new insured depository institutions or their parent holding companies to meet federal capital requirements. This starts from the date the institution becomes federally insured.

• Flexibility in Business Plans (Section 3): For the first 3 years after becoming insured, a new institution or its holding company can request changes to its pre-approved business plan. Agencies must review and decide (approve, conditionally approve, or deny) within 30 days, providing reasons for denial and suggestions for approval. If no decision is made in time, the request is automatically approved.

• Relief for Rural Community Banks (Section 4): New rural depository institutions (banks with under $10 billion in assets located in rural areas) get a fixed 8% Community Bank Leverage Ratio—a simplified measure of capital strength relative to assets—for their first 3 years. Agencies can set lower ratios during the first 2 years via rules. (The Community Bank Leverage Ratio is an alternative to more complex capital rules for smaller banks, introduced in prior law.)

• Expanded Loan Authority for Savings Associations (Section 5): Amends the Home Owners' Loan Act to allow federal savings associations (a type of thrift institution) to make secured or unsecured loans for agricultural purposes, removing prior restrictions on such lending.

• Study on New Bank Formations (Section 6): Federal banking agencies must jointly study the reasons for the low number of new insured depository institutions over the past 10 years and recommend ways to increase formations in underserved areas. They must report findings to Congress within 1 year.

• Definitions (Section 7): Clarifies key terms like "appropriate Federal banking agency," "depository institution," and "insured depository institution" by referencing the Federal Deposit Insurance Act.

Significant Changes to Existing Law

• Introduces a new 3-year phase-in for capital standards, which previously applied immediately to new institutions without grace periods.
• Adds procedural flexibility for business plan adjustments, including automatic approval for delays, not previously available.
• Lowers and phases in the leverage ratio specifically for new rural banks, building on but easing the 2018 Economic Growth, Regulatory Relief, and Consumer Protection Act's framework.
• Explicitly permits agricultural loans for federal savings associations, striking prior language that limited or excluded them alongside business loans.

Potential Impacts

• On Government Agencies: Increases workload for federal banking agencies through required rulemaking, expedited reviews, and a joint study/report, potentially streamlining approvals but adding oversight responsibilities.
• On Citizens: May improve access to local banking services in rural and underserved areas by making it easier to start new community banks, supporting small businesses, farmers, and residents who rely on nearby financial institutions.
• On International Relations: No direct impacts, as the bill focuses on domestic U.S. banking regulations.

Main Stakeholders Affected

• New and Rural Banks: De novo insured depository institutions and rural community banks benefit from reduced initial compliance burdens, potentially lowering startup costs and risks.
• Federal Banking Agencies: Entities like the FDIC, Federal Reserve, and OCC must implement and enforce the new rules, reviews, and study.
• Potential Bank Organizers and Investors: Individuals or groups seeking to form new banks, especially in rural areas, gain incentives to proceed.
• Underserved Communities: Rural residents, farmers, and small businesses may see more local lending options, including agricultural loans from savings associations.

Notable Legal, Constitutional, or Political Implications

• Legal Implications: Enhances regulatory flexibility under existing banking laws without altering core safety and soundness standards, potentially reducing litigation over strict initial compliance. The automatic approval for delayed business plan reviews could limit agency discretion but promotes efficiency.
• Constitutional Implications: None significant; the bill operates within Congress's authority to regulate banking under the Commerce Clause and does not raise free speech, due process, or federalism concerns.
• Political Implications: Supports community banking and rural economic development, aligning with bipartisan interests in reducing regulatory barriers post-2008 financial crisis, but may face debate over balancing innovation with financial stability risks.

This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.

Sponsor

Rep. Barr, Andy [R-KY-6]

Cosponsors (24)

Rep. Meuser, Daniel [R-PA-9], Rep. Downing, Troy [R-MT-2], Rep. Loudermilk, Barry [R-GA-11], Rep. De La Cruz, Monica [R-TX-15], Rep. Cline, Ben [R-VA-6], Rep. Ellzey, Jake [R-TX-6], Rep. Franklin, Scott [R-FL-18], Rep. Huizenga, Bill [R-MI-4], Rep. Knott, Brad [R-NC-13], Rep. Timmons, William R. [R-SC-4], Rep. Dunn, Neal P. [R-FL-2], Rep. Williams, Roger [R-TX-25], Rep. Flood, Mike [R-NE-1], Rep. Palmer, Gary J. [R-AL-6], Rep. Donalds, Byron [R-FL-19], Rep. Rose, John W. [R-TN-6], Rep. McDowell, Addison [R-NC-6], Rep. Alford, Mark [R-MO-4], Rep. Schmidt, Derek [R-KS-2], Rep. Fitzgerald, Scott [R-WI-5], Rep. Shreve, Jefferson [R-IN-6], Rep. Moore, Tim [R-NC-14], Rep. Lawler, Michael [R-NY-17], Rep. Sessions, Pete [R-TX-17]

Recent Actions

• 2025-05-06: Placed on the Union Calendar, Calendar No. 64.
• 2025-05-06: Reported (Amended) by the Committee on Financial Services. H. Rept. 119-90.
• 2025-05-06: Reported (Amended) by the Committee on Financial Services. H. Rept. 119-90.
• 2025-04-02: Ordered to be Reported (Amended) by the Yeas and Nays: 28 - 21.
• 2025-04-02: Committee Consideration and Mark-up Session Held
• 2025-01-16: Referred to the House Committee on Financial Services.
• 2025-01-16: Introduced in House
• 2025-01-16: Introduced in House

Bill Versions

• Promoting New Bank Formation Act — issued 2025-01-16 — PDF (6 pages)
• Promoting New Bank Formation Act — issued 2025-05-06 — PDF (8 pages)