- March 27, 2024
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Federal banking regulators have had an unofficial moratorium on new banks for more than four years — a clampdown that's aided Gulf Coast community banks in at least one big way.
That help has come in less competition and a higher, if not impossible, barrier to entry. Several Gulf Coast bankers have made that point in past interviews, that institutions launched in 2008 and early 2009, the last approvals, don't have to face the shiny new bank around the corner. The Federal Deposit Insurance Corp's post-2008 financial meltdown rules provided that security blanket.
But a pair of powerful industry lobbying groups, the Independent Community Bankers of America and the American Association of Bank Directors, want regulators to review the policies toward new bank applications. The organizations, in a joint letter delivered to the FDIC Dec. 2, say the agency's policy on de novo banks is unduly prohibitive. The FDIC has approved only one bank charter nationwide since 2011, the letter states.
The FDIC has never officially banned new banks. But in 2009 the agency extended its business-plan requirements for new banks from three to seven years. The agency, according to the letter, also requires applicants to raise capital prior to opening that would equal its leverage ratio at a minimum of 8% for seven years. And those two requirements, which the ICBA and the AABD call a “one-size-fits-all policy,” are why new banks are so rare.
“[A] policy that effectively prevents the formation of de novo banks at all, or only in severely limited circumstances, raises questions whether that kind of restrictive policy is necessary and whether the public interest is served by making it virtually impossible for de novo community banks to be formed,” the letter states. “We believe that there are less restrictive policies that will provide comfort to the FDIC and other bank regulators that de novo banks will not become a material risk to the [Deposit Insurance Fund].”
The lobbying groups, in the letter, say the FDIC should have more flexible policies.