Us Congress Senate Bill SB113

Us Congress 2025-2026 Regular Session

• Introduced: 1/16/25
• Refer: 1/16/25

Caption

Promoting New Bank Formation Act of 2025This bill eliminates and reduces certain requirements applicable to new financial institutions, certain rural community banks, and federal savings associations.Under the bill, federal banking agencies must issue rules allowing new financial institutions to meet capital requirements within three years. During this period, a financial institution 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 banks. Specifically, new rural community banks 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.

Impact

The legislation's impact is expected to be substantial in enhancing the viability of de novo financial institutions, particularly in rural areas, which have been disproportionately affected by the aforementioned trends. By easing capital requirements over a three-year period, the bill is designed to foster the establishment of new banks that can meet the financial needs of local populations. Moreover, the bill introduces mechanisms for rural community banks to leverage capital in a manner that supports their operational sustainability during their critical initial years. This should promote not only economic growth within these regions but also improve overall financial accessibility and inclusivity for residents.

Summary

SB113, known as the 'Promoting New Bank Formation Act of 2025', aims to address the issues surrounding the formation of new financial institutions, particularly in rural areas. The bill mandates that federal banking agencies establish a three-year phase-in period for new banks to comply with capital standards. This is intended to provide relief for newly established banks, especially those in underserved communities that currently face significant barriers to entry due to stringent federal regulations and declining access to banking services. The need for such legislation is underscored by the increasing number of bank closures and consolidations that have left many communities devoid of basic banking facilities.

Contention

The discussions surrounding SB113 highlighted concerns among various stakeholders about the balance between regulation and the need for accessible banking services. Proponents argue that the bill is essential for stimulating economic development in rural areas and counteracting the negative effects of bank consolidation. Critics, however, caution against potential risks associated with loosening capital standards, arguing that it might lead to inadequate oversight of new financial institutions. This tension underscores a broader debate about the regulatory environment's role in fostering economic growth while ensuring financial stability and consumer protection.

Congress_id

119-S-113

Policy_area

Finance and Financial Sector

Introduced_date

2025-01-16