Enhancing Competition: Shaping the Future of Bank Mergers and De Novo Formation

Digital Assets and Bank RegulationHouse Financial Services Subcommittee on Financial Institutions · May 14, 2025 · 119th Congress
The House Financial Services Subcommittee on Financial Institutions held this hearing to examine how regulatory barriers slow bank merger approvals and discourage the formation of new ("de novo") banks, and to review Chairman Barr's Promoting New Bank Formation Act (HR478) and related legislative proposals. Begins at ▶ 0:02:35
Transcript
Highlights

Title

Reforming bank merger review and de novo bank chartering rules

Purpose

The House Financial Services Subcommittee on Financial Institutions held this hearing to examine how regulatory barriers slow bank merger approvals and discourage the formation of new ("de novo") banks, and to review Chairman Barr's Promoting New Bank Formation Act (HR478) and related legislative proposals. Witnesses included two de novo bank founders, a bank-regulatory attorney, a free-market policy analyst, and an aspiring de novo bank founder who has sued the CFPB over small-business lending data rules. Members split along largely partisan lines, with Republicans emphasizing deregulation and merger "shot clocks" and Democrats emphasizing consolidation harms, tariffs, and lending discrimination. Begins at▶ 0:02:35

Who spoke

• Rep. Bill Foster (D-IL), Subcommittee Ranking Member▶ 0:00:00: Opened by describing the value of a diverse, competitive banking system for small businesses▶ 0:00:00, warned that Trump administration tariffs and examiner layoffs are straining community banks▶ 0:01:00, and later, in Q&A, discussed Section 1071 with witness Young▶ 0:35:27 and floated a technology-cost subsidy/voucher idea for de novo banks▶ 0:40:14.

• Rep. Andy Barr (R-KY), Subcommittee Chairman▶ 0:02:35: Introduced the witness panel▶ 0:05:15 and in questioning pressed on curbing community-group "extortion" tactics via public comments on mergers▶ 0:30:21, asked about shot clocks and financial stability▶ 0:32:28, and probed the OCC's 2024 merger-rule changes▶ 0:34:00.

• Rep. French Hill (R-AR), Full Committee Chairman▶ 0:02:35: Said the hearing continues the "making community banking great again" agenda, calling for consistent, timely merger-review guidance and reduced barriers to new bank entry▶ 0:03:00.

• Rep. Maxine Waters (D-CA), Full Committee Ranking Member▶ 0:03:53: Argued faster mergers favored by Republicans would wipe out community banks, citing the Capital One–Discover merger as regulator rubber-stamping▶ 0:04:19; later proposed requiring FDIC checklist streamlining, a de novo advisory panel, and a mentor-protégé program▶ 0:47:15▶ 0:48:07▶ 0:48:35.

• Keith Costello, President & CEO, Locality Bank▶ 0:05:44: Said starting a bank in 2022 required double the capital of his 2009 bank in the same city ($25M+ vs. $12.5M)▶ 0:41:32, and described the difficulty retaining staff and customers while a merger sits in regulatory limbo▶ 1:13:28.

• Mary Usategui, President & CEO, BankMiami▶ 0:10:25: Said Bank Miami raised over $32 million to charter and took 19 months to open, twice as long as expected▶ 0:11:09▶ 1:12:01; supported HR478's proposed three-year phased capital ramp▶ 0:12:33.

• Amanda Allexon, Partner, Simpson Thacher & Bartlett▶ 0:15:20: Testified that outmoded agency procedures, slow public-comment handling, and duplicative supervisory review are the chief causes of merger delays▶ 0:17:10▶ 0:17:58; said 2024 OCC/FDIC guidance created a presumption that merger applicants "start behind the eight ball"▶ 0:34:57.

• John Berlau, Senior Fellow, Competitive Enterprise Institute▶ 0:19:55: Cited only six de novo banks approved by the FDIC in each of 2023 and 2024, versus 100+ per year in the four decades before 2008▶ 0:22:26; supported HR478's phased-capital approach▶ 0:23:17.

• ReShonda Young, Founder, Jabez Inc.▶ 0:25:04: Described a bank illegally attempting to seize her real estate assets over 16 months after threatening foreclosure▶ 0:26:29; said she is founding Bank of JBZ, an Iowa minority depository institution, after joining a lawsuit to force CFPB enforcement of Section 1071▶ 0:29:33.

• Rep. Roger Williams (R-TX)▶ 0:40:41: Asked Costello how capital barriers affected his ability to raise funds and serve his community▶ 0:41:04, and asked Allexon and Usategui about drivers of bank-industry consolidation▶ 0:42:55▶ 0:44:43.

• Rep. Barry Loudermilk (R-GA)▶ 0:50:00: Asked about the effects of the OCC's rescinded 2024 merger rule▶ 0:50:56 and about de novo formation's impact on access to affordable credit in rural Georgia▶ 0:52:41.

• Rep. Nydia Velázquez (D-NY)▶ 0:55:37: Noted she co-authored Section 1071 with Waters [0:46:20 ref.] and asked Young how the rule could increase lending in underserved markets▶ 0:56:08; also pressed Young on the impact of Trump tariffs on small businesses▶ 0:58:17.

• Rep. John Rose (R-TN)▶ 0:59:58: Raised concerns that banks categorically deny services to independent ATM operators, citing a constituent, PAL Group USA, whose account was just closed by Service First Bank in Nashville▶ 1:01:56.

• Rep. Juan Vargas (D-CA)▶ 1:05:09: Challenged Costello on the "dissonance" between praising small community banks and pursuing growth through repeated mergers, using a 1910s auto-industry consolidation analogy▶ 1:08:30▶ 1:08:59; raised concerns about proposed CDFI funding cuts▶ 1:09:21.

• Rep. Dan Meuser (R-PA)▶ 1:09:49: Asked why mutual bank charters are so rare (only one formed in 50 years)▶ 1:10:48 and asked why regulators let merger applications sit in limbo without formal explanation▶ 1:13:28.

• Rep. Sean Casten (D-IL)▶ 1:15:35: Questioned the tension between bank-stability review and antitrust enforcement, and whether merger "shot clocks" could disadvantage smaller applicants against better-resourced filers▶ 1:16:05▶ 1:20:03.

• Rep. Young Kim (R-CA)▶ 1:20:59: Asked Costello and Usategui about regulatory differences between their 2009 and 2022 bank launches and how frequently business plans must be revised▶ 1:21:50▶ 1:23:36.

• Rep. Al Green (D-TX)▶ 1:26:01: Conducted a "truth-telling" poll of witnesses on whether invidious discrimination exists in banking — only Young raised her hand▶ 1:27:26 — and pressed Berlau on whether HR478's phased capital would meaningfully expand Black bank ownership▶ 1:29:41▶ 1:30:37.

• Rep. Tim Moore (R-NC)▶ 1:31:52: Cited a drop from 132 new bank charters per year (2000–2009) to 88 total since 2010▶ 1:32:09 and asked Usategui and Costello about post-charter regulatory burdens▶ 1:33:38▶ 1:36:05.

• Rep. William Timmons (R-SC)▶ 1:36:58: Cited a U.S. Chamber of Commerce paper warning of a "barbell" banking system and asked Allexon how Biden-era merger guidelines disproportionately burden midsize banks▶ 1:37:26▶ 1:38:07.

• Rep. Scott Fitzgerald (R-WI)▶ 1:42:12: Announced plans to introduce the Bank Competition Modernization Act, which would count credit unions, fintechs, and farm credit companies in merger concentration analysis▶ 1:44:39.

Key moments

• Costello testified his second bank (2022) required double the capital of his first (2009) — roughly $25M versus $12.5M — in the same city, and a competitor abandoned a bank charter attempt for lack of capital▶ 0:41:32▶ 0:41:47.

• Berlau said the FDIC approved just six new banks in each of 2023 and 2024, compared with 100+ per year in most years before the 2008 financial crisis, even during the savings-and-loan crisis▶ 0:22:26.

• Waters said Trump regulators "rubber stamped" the Capital One–Discover merger, which she argued will cause more consumer harm, while Republicans on the panel argued expedited merger review protects financial stability▶ 0:04:19▶ 0:32:51.

• Young described a bank's loan officer threatening to foreclose and steal her properties over 16 months, resolved only after she involved the media — the episode that led her to found Bank of JBZ▶ 0:26:29▶ 0:26:58.

• Rep. Al Green polled the witness panel on whether "invidious discrimination" exists in banking; only Young raised her hand, and Green pressed Berlau on whether phased-in capital requirements would meaningfully expand Black-owned bank formation, receiving a qualified "I don't know that it would solve all the problems"▶ 1:27:26▶ 1:30:37.

• Rep. Vargas challenged Costello's "free enterprise" framing by analogizing bank consolidation to the collapse of the 1910s U.S. auto industry into four major makers, asking whether the "logical conclusion" of unrestrained growth is a few mega-banks swallowing all community banks▶ 1:08:30▶ 1:08:59.

• Rose said Service First Bank in Nashville had just closed a nearly decade-old account belonging to his constituent, an independent ATM operator, and argued examiners have systematically pressured banks to treat such businesses as high-risk▶ 1:01:56▶ 1:03:45.

• Usategui said Bank Miami raised over $32 million and took about 19 months to open (twice the expected time), while the number of banks headquartered in Miami-Dade fell from 42 (2008) to 18 (2023)▶ 0:11:09▶ 0:11:37▶ 1:12:01.

• Allexon said 2024 OCC/FDIC merger guidance created a "presumption" that transactions were negative, forcing applicants to start "behind the eight ball" even before satisfying statutory factors▶ 0:34:57▶ 1:46:44.

• Moore cited a decline from roughly 1,300 new bank charters (132/year) from 2000–2009 to just 88 total since 2010▶ 1:32:09.

Metadata

CommitteeHouse Financial Services Subcommittee on Financial Institutions
Chamber / CongressHouse · 119th Congress
DateMay 14, 2025
TypeHearing
Witnesses
Mr. John Berlau — Senior Fellow and Director of Finance Policy, Competitive Enterprise Institute
Mrs. ReShonda Young — Founder, Jabez Inc.
Ms. Mary Usategui — President and CEO, BankMiami
Mr. Keith Costello — President and CEO, Locality Bank
Ms. Amanda Allexon — Partner, Simpson Thacher & Barlett LLP
Videoyoutube
Transcript247 caption blocks · 17,624 words · 1:47:36 runtime
EventCongress.gov 118234