Promoting New Bank Formation Act
Promoting New Bank Formation Act
Plain Language Summary
# Promoting New Bank Formation Act - Plain Language Summary **What the Bill Does:** This bill would make it easier to start new banks by relaxing certain federal rules and requirements. Specifically, it would give newly formed banks three years to meet capital requirements (the money they must keep on hand) instead of meeting them immediately. It also temporarily lowers the "community bank leverage ratio"—a measurement of how much debt a bank can carry—for new rural banks from 9% to 8% for the first three years. Additionally, the bill removes some restrictions on federal savings associations (a type of bank). **Who It Affects:** The bill primarily targets people starting new banks, particularly in rural areas, and the communities they would serve.
It could also affect customers of these new financial institutions and existing banks that compete with them. Federal banking regulators would need to issue new rules to implement these changes. **Current Status:** The bill was introduced by Rep. Andy Barr (R-Kentucky) and is currently in committee, meaning it's in an early stage of the legislative process and has not yet been voted on by the full House of Representatives.
CRS Official Summary
Promoting New Bank Formation ActThis bill eliminates and reduces certain requirements applicable to new depository institutions, certain rural community depository institutions, and federal savings associations.Federal banking agencies must issue rules allowing a new depository institution or depository institution holding company three years to meet capital requirements. During this period, a depository institution or its depository institution holding company may request to deviate from an approved business plan, and the appropriate agency has 30 days to approve or deny the request.In addition, the community bank leverage ratio—a way of evaluating debt levels—is reduced for new rural community depository institutions. Specifically, new rural community depository institutions must have a ratio of 8%, with a three-year phase-in of the rate. After this period, the ratio rises to its current level of 9%. Finally, the bill removes certain restrictions to allow federal savings associations to invest in, sell, or otherwise deal in agricultural loans.
Latest Action
Placed on the Union Calendar, Calendar No. 64.