Promoting New Bank Formation Act
4/5/2025, 8:05 AMSummary of Bill HR 478
Bill 119 hr 478, also known as the "De Novo Capital Standards Relief Act," aims to provide relief for newly established financial institutions, particularly those in rural communities, by requiring Federal banking agencies to establish a 3-year phase-in period for these institutions to comply with Federal capital standards.The bill recognizes the challenges faced by de novo financial institutions in meeting the stringent capital requirements set by Federal regulators. By allowing a 3-year grace period for these institutions to gradually meet the capital standards, the bill aims to promote the growth and stability of new banks and credit unions.
In addition to the phase-in period, the bill also includes provisions to provide specific relief for de novo rural community banks. These institutions often face unique challenges due to their location and customer base, and the bill seeks to address these challenges by offering targeted support. Overall, the De Novo Capital Standards Relief Act is designed to support the establishment and growth of new financial institutions, particularly in rural areas, by providing them with the necessary time and resources to comply with Federal capital standards.
Congressional Summary of HR 478
Promoting New Bank Formation Act
This bill eliminates and reduces certain requirements applicable to new depository institutions, certain rural community depository institutions, and federal savings associations.
Federal banking agencies must issue rules allowing a new depository institution or depository institution holding company three years to meet capital requirements. During this period, a depository institution or its depository institution holding company 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 depository institutions. Specifically, new rural community depository institutions 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.
