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HR 478

MEMORIAL-DANISE S. HABUN

104th Regular Session Introduced by Anna Moeller

The bill lowers near-term barriers for new banks by authorizing a 3-year capital phase‑in, streamlined plan deviations, and relaxed rural leverage ratios to promote de novo bank fo

Resolution Adopted
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Bill Summary · HR 478

Summary — H.R. 478 (119th Congress) — "Promoting New Bank Formation Act"

Status (select): Introduced Jan 16, 2025; referred to House Committee on Financial Services; reported (amended) by committee (H. Rept. 119‑90) May 6, 2025; placed on the Union Calendar (Calendar No. 64). Committee vote on reporting: 28–21. (Note: the number H.R. 478 has also been used for other resolutions in other contexts; this summary addresses the Promoting New Bank Formation Act as reported by the Financial Services Committee.)

Purpose
- To encourage formation of new depository institutions (de novo banks) by easing near‑term regulatory capital and supervisory constraints, provide specific relief for small rural community banks, broaden lending authority for federal savings associations, and direct a cross‑agency study on barriers to new bank formation.

Key provisions
1. Three‑year phase‑in of federal capital standards
- The appropriate Federal banking agencies must issue rules allowing a 3‑year phase‑in period for any depository institution (or depository institution holding company) newly insured as of the start date to meet otherwise applicable federal capital requirements. The phase‑in begins on the date the institution becomes an insured depository institution.

  1. Business‑plan flexibility and accelerated review

    • During the 3‑year period after insurance, an institution (or its holding company) may request deviations from an agency‑approved business plan.
    • Agencies must approve, conditionally approve, or deny such requests within 30 days of receipt and must provide reasons and suggested changes if denied.
    • If an agency fails to act within 30 days, the request is deemed approved.

  2. Rural Community Bank Leverage Ratio (CBLR) relief

    • For a “rural depository institution” (defined as < $10 billion assets and located in a rural area per 12 C.F.R. §1026.35(b)(iv)(A)), the Community Bank Leverage Ratio is set at 8.0% during the 3‑year period following insurance (down from 8.5%).
    • Agencies must phase in lower CBLR percentages for the first two years of that 3‑year period.

  3. Expanded agricultural lending authority for Federal Savings Associations

    • Amends section 5(c) of the Home Owners’ Loan Act to explicitly add “agricultural loans” to the list of permissible loans for federal savings associations.

  4. Study and report on de novo institutions

    • The federal banking agencies must jointly study causes of the low number of de novo insured depository institutions over the prior 10 years and ways to promote formation in underserved areas.
    • A joint report to Congress is required within 1 year of enactment.

Affected parties
- New (de novo) depository institutions and their holding companies (primary beneficiaries).
- Rural community banks meeting the size/location definition (receive adjusted CBLR treatment).
- Federal savings associations (expanded lending authority for agricultural purposes).
- Federal banking agencies (rulemaking, supervisory adjustments, and required study/reporting).
- Potentially, communities currently underserved by banking services if new formation increases.

Procedural and implementation notes
- The bill directs agency rulemaking to implement phase‑ins and CBLR phase‑in schedules; exact lower percentages and mechanics to be set by rule.
- The 30‑day deemed approval provision creates practical timelines that shorten supervisory discretion unless agencies act promptly.
- The committee report (H. Rept. 119‑90) includes minority views; the report references a Committee and CBO cost estimate (details in the report).

Potential impacts and considerations
- Supporters argue the bill lowers near‑term capital barriers and regulatory uncertainty that deter de novo formation, especially in underserved/rural areas.
- Critics or supervisors may raise safety‑and‑soundness concerns about relaxed capital expectations in the early years and the potential for increased risk-taking.
- Outcomes depend heavily on subsequent agency rulemaking, supervisory practices, and how the study’s findings are used by Congress or regulators.

Compiled from official sources — confirm details with the bill’s official record.

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