U.S. Senator Cindy Hyde-Smith and Congressman Andy Barr have reintroduced legislation aimed at increasing the formation of new banks in rural and underserved areas. The Promoting New Bank Formation Act seeks to ease federal regulatory restrictions that have limited bank availability in states like Mississippi and Kentucky.
Senator Hyde-Smith emphasized the importance of local capital and banking services for economic vitality, particularly in rural communities. “This legislation creates a pathway to chartering new banks for rural areas that continue to lose community banking options,” she stated.
Congressman Barr highlighted the need for a diverse banking system, noting, “This legislation focuses on reducing barriers for new banks to form, preserving the community banking system, and ensuring that consolidation doesn’t limit access to financial services in underserved areas.”
The initiative responds to a decline in newly-chartered banks since the Dodd-Frank Act’s enactment in 2010. From 2007’s issuance of 181 new bank charters, fewer than six have been issued annually from 2010 to 2023.
Mississippi has seen a significant drop in its number of banking institutions over the past 15 years, with no new banks chartered during this period. The proposed act would support “de novo” bank formation by allowing newly-chartered banks a three-year phase-in period with less stringent capital requirements.
The Mississippi Bankers Association (MBA), Independent Community Bankers Association (ICBA), and American Bankers Association (ABA) have endorsed the bill. Gordon Fellows of MBA expressed support, stating it could unlock economic growth opportunities in rural communities.
ICBA President Rebeca Romero Rainey also voiced support: “Eliminating obstacles to de novo bank formation…is a critical piece of ICBA’s ‘Repair, Reform, and Thrive’ plan.” ABA President Rob Nichols added that more competition among banks benefits the economy.
Previously, Hyde-Smith and Barr introduced similar legislation during the 118th Congress.
