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

Digital Assets and Bank RegulationHouse Financial Services Subcommittee on Financial Institutions · 2025-05-14 · 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 at0:02:35

Who spoke

Rep. Bill Foster (D-IL), Subcommittee Ranking Member0:00:00: Opened by describing the value of a diverse, competitive banking system for small businesses0:00:00, warned that Trump administration tariffs and examiner layoffs are straining community banks0:01:00, and later, in Q&A, discussed Section 1071 with witness Young0:35:27 and floated a technology-cost subsidy/voucher idea for de novo banks0:40:14.

Rep. Andy Barr (R-KY), Subcommittee Chairman0:02:35: Introduced the witness panel0:05:15 and in questioning pressed on curbing community-group "extortion" tactics via public comments on mergers0:30:21, asked about shot clocks and financial stability0:32:28, and probed the OCC's 2024 merger-rule changes0:34:00.

Rep. French Hill (R-AR), Full Committee Chairman0:02:35: Said the hearing continues the "making community banking great again" agenda, calling for consistent, timely merger-review guidance and reduced barriers to new bank entry0:03:00.

Rep. Maxine Waters (D-CA), Full Committee Ranking Member0:03:53: Argued faster mergers favored by Republicans would wipe out community banks, citing the Capital One–Discover merger as regulator rubber-stamping0:04:19; later proposed requiring FDIC checklist streamlining, a de novo advisory panel, and a mentor-protégé program0:47:150:48:070:48:35.

Keith Costello, President & CEO, Locality Bank0:05:44: 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 limbo1:13:28.

Mary Usategui, President & CEO, BankMiami0:10:25: Said Bank Miami raised over $32 million to charter and took 19 months to open, twice as long as expected0:11:091:12:01; supported HR478's proposed three-year phased capital ramp0:12:33.

Amanda Allexon, Partner, Simpson Thacher & Bartlett0:15:20: Testified that outmoded agency procedures, slow public-comment handling, and duplicative supervisory review are the chief causes of merger delays0:17:100:17:58; 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 Institute0:19:55: 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 20080:22:26; supported HR478's phased-capital approach0:23:17.

ReShonda Young, Founder, Jabez Inc.0:25:04: Described a bank illegally attempting to seize her real estate assets over 16 months after threatening foreclosure0:26:29; said she is founding Bank of JBZ, an Iowa minority depository institution, after joining a lawsuit to force CFPB enforcement of Section 10710:29:33.

Rep. Roger Williams (R-TX)0:40:41: Asked Costello how capital barriers affected his ability to raise funds and serve his community0:41:04, and asked Allexon and Usategui about drivers of bank-industry consolidation0:42:550:44:43.

Rep. Barry Loudermilk (R-GA)0:50:00: Asked about the effects of the OCC's rescinded 2024 merger rule0:50:56 and about de novo formation's impact on access to affordable credit in rural Georgia0:52:41.

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 markets0:56:08; also pressed Young on the impact of Trump tariffs on small businesses0:58:17.

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 Nashville1:01:56.

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 analogy1:08:301:08:59; raised concerns about proposed CDFI funding cuts1:09:21.

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 explanation1:13:28.

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 filers1:16:051:20:03.

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 revised1:21:501:23:36.

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 hand1:27:26 — and pressed Berlau on whether HR478's phased capital would meaningfully expand Black bank ownership1:29:411:30:37.

Rep. Tim Moore (R-NC)1:31:52: Cited a drop from 132 new bank charters per year (2000–2009) to 88 total since 20101:32:09 and asked Usategui and Costello about post-charter regulatory burdens1:33:381:36:05.

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 banks1:37:261:38:07.

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 analysis1:44:39.

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 capital0:41:320:41:47.

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 crisis0:22:26.

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 stability0:04:190:32:51.

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 JBZ0:26:290:26:58.

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"1:27:261:30:37.

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 banks1:08:301:08:59.

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-risk1:01:561:03:45.

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)0:11:090:11:371:12:01.

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 factors0:34:571:46:44.

Moore cited a decline from roughly 1,300 new bank charters (132/year) from 2000–2009 to just 88 total since 20101:32:09.

Metadata

CommitteeHouse Financial Services Subcommittee on Financial Institutions
Chamber / CongressHouse · 119th Congress
Date2025-05-14
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