H.R. 478: Promoting New Bank Formation Act

This bill, known as the Promoting New Bank Formation Act, focuses on easing regulations for new banks and specifically targets rural community banks. Here are the key components of the bill:

1. Phase-In Period for Capital Standards

The bill requires federal banking agencies to create rules that would allow newly established banks (referred to as de novo banks) a three-year period to meet federal capital requirements. This phase-in period would start from the date they become insured depository institutions, allowing these banks more time to build their capital reserves without facing immediate scrutiny.

2. Changes to Business Plans

During the three-year phase-in period, newly insured banks or their holding companies can request changes to their previously approved business plans. The requests must be reviewed by the appropriate federal banking agency within 30 days, after which the agency can approve, conditionally approve, or deny the request. If no decision is made within that timeframe, the request is considered automatically approved. If denied, the agency must provide reasons and suggest modifications that could lead to an approval.

3. Leverage Ratio for Rural Banks

The bill sets the Community Bank Leverage Ratio for rural depository institutions at 8% during the same three-year period. This could help smaller rural banks maintain higher lending capabilities in their communities. Additionally, the federal agencies are tasked with establishing lower leverage ratio percentages during the first two years of this period to ease the transition for these banks.

4. Agricultural Loan Authority

The bill also amends existing laws related to the Home Owners' Loan Act, allowing federal savings associations to offer both secured and unsecured loans for agricultural purposes. This broadens the financial resources available for agricultural activities, benefiting rural economies.

5. Study on New Banks

The federal banking agencies are required to conduct a study exploring the reasons behind the low establishment of new insured depository institutions over the past decade. This study aims to identify challenges and come up with recommendations to encourage the formation of more banks, especially in areas that currently lack access to banking services. A report summarizing the findings must be submitted to Congress within one year of the bill's enactment.

6. Definitions

The bill includes definitions for terms like "appropriate Federal banking agency," "depository institution," and "insured depository institution," which are based on existing definitions in the Federal Deposit Insurance Act.

Relevant Companies

• KEY - KeyCorp: As a bank holding company, KeyCorp could be affected as new competition from de novo banks might impact market share and lending practices.
• USB - U.S. Bancorp: Similar to KeyCorp, increased competition from new banks could influence U.S. Bancorp's operations and financial strategies.
• PNC - PNC Financial Services: The establishment of new banks, particularly in underserved rural areas, might shift customer focus and services provided by PNC.