S. 113 — Promoting New Bank Formation Act of 2025

This section states congressional findings concerning trends in bank closures and consolidation, including slowed de novo bank formation following the financial crisis; disproportionate impacts on underserved rural and urban communities; and data from a November 2019 Federal Reserve report identifying 44 deeply affected counties (i.e., those with fewer than 10 branches in 2012 that lost at least 50% by 2017), 89% of which were rural with higher poverty rates, lower median incomes, and a higher share of African-American residents compared to all rural communities.

This section defines the following terms for purposes of the Act: (1) appropriate Federal banking agency, depository institution, and depository institution holding company, as defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813); (2) Community Bank Leverage Ratio, as defined in section 201(a) of the Economic Growth, Regulatory Relief, and Consumer Protection Act (12 U.S.C. 5371 note); (3) financial institution, as a depository institution or depository institution holding company; and (4) rural community bank, as a financial institution with total consolidated assets of less than $10 billion located in a rural area, as defined in 12 C.F.R. § 1026.35(b)(2)(iv)(A) or any successor regulation.

This section directs the appropriate federal banking agencies to issue rules providing a 3-year phase-in period for a financial institution to meet applicable federal capital requirements, beginning on the date the institution's deposit insurance from the Federal Deposit Insurance Corporation (FDIC) becomes effective. (Thus, newly insured institutions (i.e., de novo banks) receive temporary relief from full compliance with standards such as those under Basel III.)

This section authorizes a financial institution to request a deviation from its business plan approved by the appropriate federal banking agency during the three-year period beginning on the date its FDIC deposit insurance becomes effective. The agency must approve, conditionally approve, or deny the request within 30 days of receipt, notifying the institution and—if denying—providing the reason and suggested changes for approval. A request is deemed approved if the agency fails to act within 30 days.

This section establishes an 8% Community Bank Leverage Ratio (CBLR) for rural community banks during the three-year period beginning on the date their Federal Deposit Insurance Corporation (FDIC) deposit insurance becomes effective. (As background, the CBLR is a simplified regulatory capital measure that qualifying community banks may elect in lieu of risk-weighted capital requirements.) It further directs the appropriate federal banking agencies to issue rules phasing in the 8% CBLR by authorizing lower ratios during the first two years of that period.

This section expands the lending authority of Federal savings associations by (1) adding secured or unsecured loans for agricultural purposes as a permitted qualified thrift investment; and (2) removing agricultural loans from aggregate percentage limits on consumer or business loans.

This section directs the appropriate federal banking agencies to jointly conduct a study on (1) the principal causes for the low number of de novo financial institutions (i.e., newly chartered banks and thrifts) in the 10-year period ending on the date of enactment of this Act and (2) ways to promote more de novo financial institutions in areas currently underserved by financial institutions. The agencies must issue a report to Congress containing all findings and determinations within one year of enactment.