SEN. HYDE-SMITH, REP. BARR RENEW BID TO TRIGGER BANK FORMATION IN RURAL, UNDERSERVED AREAS
New Bicameral Bill Introduced to Spur Community Banking Growth, Stop Decline in Banking Options for Many Mississippians
WASHINGTON, D.C. – U.S. Senator Cindy Hyde-Smith (R-Miss.) and U.S. Congressman Andy Barr (R-Ky.) today reignited their effort to increase the approval for new banks to provide financial and banking services in rural and other underserved areas.
Hyde-Smith and Barr today introduced the Promoting New Bank Formation Act, legislation that would ease federal regulatory restrictions that have stifled bank and capital availability in Mississippi, Kentucky, and other rural states.
“The availability of local capital and basic banking services is necessary to sustain and grow economic vitality, more so in rural communities. This legislation creates a pathway to chartering new banks for rural areas that continue to lose community banking options. I believe it is necessary because regulations intended to police big banking institutions are killing small town banking, which makes it harder to live and thrive in rural America,” Senator Hyde-Smith said.
“A strong and diverse banking system is essential for a healthy economy,” said Congressman Barr. “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. By encouraging the creation of new institutions, we can strengthen competition, expand opportunities, and protect the financial system’s backbone—our community banks.”
This legislation was written in response to the precipitous decline in newly-chartered banks following the enactment of the Dodd-Frank Act in 2010. In 2007, 181 new bank charters were issued, but from 2010 to 2023, an average of fewer than six new charters were issued annually.
Mississippi is among the many states, most rural, that haven’t seen any new banks chartered. The number of banking institutions in Mississippi has declined by 36 percent over just the last 15 years, dropping from 97 to 62, leaving many underserved areas without adequate financial services.
Promoting New Bank Formation Act would encourage the formation of “de novo” banks by providing a three-year phase-in period during which newly-chartered banks would be given time to meet less stringent capital requirements as they adapt to a business model that aligns with the needs and circumstances of the communities they serve. (Read a bill summary here.)
The Mississippi Bankers Association (MBA), Independent Community Bankers Association (ICBA), and American Bankers Association (ABA) endorse the Hyde-Smith/Barr legislation.
“Locally chartered and headquartered banks are critical to the economic growth and success of their communities. No one understands the economic needs of a community better than local bankers. Unfortunately, the country has experienced a wave of bank consolidation that has gone on for more than a decade, negatively impacting rural communities,” said Gordon Fellows, MBA President and CEO. “Senator Hyde-Smith’s bill will encourage new bank formations in rural communities by making important temporary regulatory adjustments to help new rural banks establish themselves. The Mississippi Bankers Association fully supports Senator Hyde-Smith’s bill, which has the potential to unlock economic growth and investment opportunities in rural communities around our state. Thank you, Senator Hyde-Smith, for championing rural communities.”
“The nation’s community banks strongly support this important legislation from Representative Andy Barr and Senator Cindy Hyde-Smith to promote the creation of new community banks, especially in America’s rural areas,” ICBA President and CEO Rebeca Romero Rainey said. “Eliminating obstacles to de novo bank formation to fuel access to banking services in local communities is a critical piece of ICBA’s ‘Repair, Reform, and Thrive’ plan for the new 119th Congress and incoming Trump administration. We look forward to working with Representative Barr and Senator Hyde-Smith to advance this critical legislation.”
“We strongly support the Promoting New Bank Formation Act, which will help spur the creation of new banks in the U.S. and expand access to banking in the process. Our economy benefits by having more banks competing for Americans business, and we deeply appreciate Senator Hyde-Smith’s efforts to make it easier to launch a de novo bank in this country. This bill will unlock economic opportunity, growth, and investment in communities most in need, while also promoting a vibrant and highly competitive financial services marketplace. We urge the Senate to advance this important piece of legislation,” said Rob Nichols, ABA President and CEO.
Hyde-Smith and Barr introduced similar legislation, the Promoting Access to Capital in Underbanked Communities Act, in the 118th Congress.
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