H.R.478 - Promoting New Bank Formation Act (119th Congress)
Summary
H.R.478, the Promoting New Bank Formation Act, aims to facilitate the establishment of new financial institutions by easing regulatory burdens during their initial years. It mandates a 3-year phase-in period for de novo financial institutions to comply with federal capital standards. The bill also provides specific relief for de novo rural community banks, including adjustments to the Community Bank Leverage Ratio.
Expected Effects
The Act is likely to encourage the formation of new banks, particularly in rural areas, by reducing the initial capital requirements and providing regulatory flexibility. This could lead to increased competition in the banking sector and greater access to financial services for communities, especially in underserved regions. The study on de novo institutions will provide data for future policy adjustments.
Potential Benefits
- Increased access to capital for new banks.
- Support for rural community banks.
- Potential for increased competition in the banking sector.
- Streamlined regulatory processes for new institutions.
- Enhanced agricultural lending by federal savings associations.
Potential Disadvantages
- Potential increased risk due to lower initial capital requirements.
- Possible strain on federal banking agencies to oversee new institutions.
- Risk of moral hazard if banks take excessive risks during the phase-in period.
- The 30-day review period for business plan changes might be insufficient for complex cases.
- Potential for unintended consequences from changes to agricultural loan authority.
Constitutional Alignment
The bill primarily aligns with Congress's power to regulate commerce and establish uniform laws on the subject of bankruptcies, as outlined in Article I, Section 8 of the Constitution. By regulating financial institutions and setting capital standards, the bill falls under the purview of congressional authority over interstate commerce. The necessary and proper clause could also be invoked to justify the specific provisions aimed at facilitating new bank formation.
Impact Assessment: Things You Care About ⓘ
This action has been evaluated across 19 key areas that matter to you. Scores range from 1 (highly disadvantageous) to 5 (highly beneficial).