Banking professional launches de novo bank to address community needs in Iowa

The U.S. House Committee on Financial Services convened on May 15, 2025, to discuss the critical topic of enhancing competition in the banking sector, focusing on bank mergers and the formation of de novo banks. The meeting featured testimonies from various stakeholders, highlighting the challenges and opportunities within the current banking landscape.

The session began with a testimony from a banking entrepreneur who shared their personal journey of establishing a new bank aimed at serving all communities with dignity and respect. They detailed the arduous process of starting a de novo bank, which included navigating a complex checklist of 74 items and facing significant financial hurdles, such as preopening expenses ranging from $800,000 to $1.5 million and post-charter capital needs of at least $20 million. The entrepreneur emphasized the rarity of de novo banks, particularly in Iowa, where the last charter was issued in 1997, and noted the lack of experience among regulators in handling such applications.

The discussion then shifted to the challenges faced by Minority Depository Institutions (MDIs), which represent only about 3% of banks in the U.S. The entrepreneur called for greater technical assistance for both banks and regulators to facilitate the formation of MDIs, stressing the importance of these institutions in serving low- and moderate-income communities. They also raised concerns about the high costs and regulatory barriers associated with starting a de novo bank, particularly regarding capital raising from accredited investors.

Following this testimony, committee members engaged in a dialogue about the regulatory environment surrounding bank mergers. A member highlighted the pressure banks face from community groups during merger applications, suggesting that public comments should not unduly delay the approval process. Another witness supported this view, arguing that while public comments are important, they should not hinder timely processing of applications that meet statutory criteria.

The conversation also addressed recent changes in merger evaluation criteria by the Office of the Comptroller of the Currency (OCC) and the Department of Justice, which some witnesses argued have discouraged healthy merger activity. They expressed concern that these changes create a presumption against mergers, potentially stifling competition in the banking sector.

The meeting concluded with a call for a more streamlined merger review process, including the introduction of a "shot clock" to ensure timely decisions. This approach aims to enhance financial stability and prevent disruptions in banking services, particularly in light of recent sector instabilities.

Overall, the committee's discussions underscored the need for regulatory reforms that promote competition while ensuring ethical practices in the banking industry. The testimonies highlighted the complexities of starting new banks and the importance of supporting diverse banking institutions to better serve all communities.