Exclusive: Rep. Andy Barr to reintroduce de novo bank bill

WASHINGTON — Rep. Andy Barr, R-Ky., is reintroducing a bill that would make it easier for new banks to form. 

Although Barr has introduced the bill several other times — first in 2021 — it has a much better chance of becoming law in the 119th Congress. That’s because Republicans control both the House and the Senate, as well as the White House, and the bipartisan interest in community and rural banking in the wake of the Silicon Valley Bank crisis makes the proposal more appealing. 

Last year, the bill advanced out of the House Financial Services Committee, where Barr served and continues to serve as chairman of the financial institutions subcommittee. 

The bill, shared with American Banker, is backed by industry trade groups. It would establish a three-year phase-in period for new banks to comply with federal capital standards. 

De novo banks would also be able to request a change in business plan from its federal regulator within the first three years of becoming an insured depository institution. If that request is neither approved or denied within 30 days, the law would deem the change in business plan approved. 

It would also provide capital relief for new banks in rural areas, allowing them to maintain a leverage ratio of 8% during the first three years after becoming an insured depository institution. The bill defines rural community banks as those with less than $10 billion in assets and located in a non-metropolitan statistical area or  ‘micropolitan’ statistical area adjacent to a metro area, as defined by the U.S. Office of Management and Budget. 

The Independent Community Bankers of America said it backs the legislation. 

In a letter to the House Financial Services Committee in 2023, ICBA President and CEO Rebeca Romero Rainey said that the prior iteration of the bill would “facilitate the creation of de novo banks, encourage investment in these banks and promote their viability.” 

“Excessive regulation is a burden for all community banks, but it presents a special challenge for de novos that must dedicate their resources to establishing a foothold in their market and achieving viability,” she said in the letter. 

Romero Rainey said in a statement that the trade group “strongly supports” the newly reintroduced legislation as well. 

The American Bankers Association said in a statement that the bill would “help spur the creation of new banks in the U.S. and expand access to banking in the process.” 

“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,” the ABA said. “We urge the House Financial Services Committee to advance this important piece of legislation.”

The bill is also likely to get buy-in from the House Financial Services Committee’s new chairman, Rep. French Hill, R-Ark. While Barr competed with Hill for the top spot on the committee, the lawmakers share similar views about bank regulation and policy, particularly as it concerns rural community banks. 

Hill included ideas that would help de novo banks attract capital in his “Make Community Banking Great Again” document, which outlines some of his priorities for the banking industry during his tenure as chairman. 

“I just believe that we’ve lost our way in attracting new capital into the industry on a de novo basis, the formation of mid-sized companies through mergers and acquisitions, and in the resolution of a failing institution,” Hill said in an interview with American Banker late last year.