House passes bill intended to spark de novo growth

The House of Representatives passed a bill intended to pave the way for more de novo formations.

The bill, sponsored by Rep. Jake Auschincloss (D-Mass.), requires federal banking regulators to undertake a joint study to determine the challenges faced by depository institutions seeking de novo charters. The bill, which still must be passed in the Senate, calls for legislative recommendations on how to spark de novo activity.

The ICBA expressed support for the bill in a letter to key Congressional leaders prior to the House vote, describing it as crucial to ensure unbanked and underserved communities can access capital and banking services. 

Only 44 de novo banks have been established over the previous decade, Federal Reserve Gov. Michelle Bowman noted last year. Key reasons for the lag in activity include the high startup costs potential de novo investors must pay — $10 million to $30 million — all while keeping up with staffing, compliance and other responsibilities. 

“There has been a dearth of de novo charters in the past decade,” the ICBA wrote. “An infusion of new charters is needed to offset consolidation in the banking sector and create a competitive landscape that will benefit consumers and small businesses alike.” 

The bill was also introduced last year in the House but did not pass. At the time, the American Bankers Association described the legislation as providing a “long overdue analysis and strategic plan needed to help proposed depository institutions successfully apply for de novo depository institution charters in a manner that promotes increased availability of banking and financial services and other consumer-targeted objectives.”