WASHINGTON, D.C. – U.S. Sen. Cindy Hyde-Smith  and U.S. Rep. Andy Barr on Thursday 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 introduced the Promoting New Bank Formation Act, legislation that would ease federal restrictions on 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,” Hyde-Smith said.

 

This legislation was written in response to a sharp 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 % over just the last 15 years, dropping from 97 to 62, leaving many underserved areas without adequate financial services, Hyde-Smith’s office said in a news release announcing the legislation.

 

Promoting New Bank Formation Act is intended to 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.

 

The Mississippi Bankers Association, Independent Community Bankers Association, and American Bankers Association 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.  “Sen. 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 Sen. Hyde-Smith’s bill, which has the potential to unlock economic growth and investment opportunities in rural communities around our state.  Thank you, Sen. Hyde-Smith, for championing rural communities.”

 

Hyde-Smith and Barr introduced similar legislation, the Promoting Access to Capital in Underbanked Communities Act, in the 118th Congress.