At a hearing of the House Financial Services Subcommittee on Financial Institutions, members and witnesses discussed legislation and regulatory changes aimed at speeding bank merger reviews and making it easier to form de novo banks.

The panel’s chair framed the session as an effort to “enhance competition” by removing delays and uncertainty from merger review and by encouraging new bank entry. “The current system for reviewing bank mergers is too slow, too uncertain, and too costly,” the chair said, and introduced the Bank Failure Prevention Act, which would impose a statutory “shot clock” on agency merger reviews. He also said he supports a congressional review resolution to overturn a prior merger rule recently rescinded by Acting Comptroller Rodney Hood.

Why it matters: witnesses and members said lengthy regulatory timelines, higher capital requirements and inconsistent agency guidance have contributed to a steep decline in new bank charters and discourage transactions that could preserve community banking services. Several witnesses argued that fewer new entrants and drawn‑out merger reviews reduce competition, drive customers to nonbank lenders, and raise costs for communities that rely on relationship banking.

Witnesses described the obstacles they faced starting or applying to start banks. Keith Costello, president and CEO of Locality Bank, said regulatory and capital costs make most de novo efforts economically infeasible: “Starting a new bank today is not financially viable for most entrepreneurs or investors,” Costello said, adding that his group raised $38,000,000 to launch Locality Bank and grew to $300,000,000 in assets in three years. Mary Ostegui, president and CEO of Bank Miami, said Bank Miami’s chartering process took roughly twice as long as expected and that Miami‑Dade lost a large number of headquartered banks between 2008 and 2023. Both urged a phased‑in capital regime for new banks.

Legal and process reforms were a central focus of testimony. Amanda Alexon, a partner at Simpson Thacher and former Federal Reserve applications reviewer, recommended procedural fixes such as clearer internal agency calendars, better triage of public comments, and clearer information expectations. “The receipt of a public comment should not add months to processing or immediately trigger heightened agency action,” Alexon said, arguing agencies can give comments due consideration while preserving timely processing.

Free‑market advocates at the hearing urged removing regulatory barriers. John Berlau of the Competitive Enterprise Institute called the decline in new banks since 2008 “striking” and urged Congress and regulators to lower upfront capital demands and reduce unnecessary red tape.

Panelists and members also raised equity and consumer‑protection topics. Roshanda Young, founder of the proposed Bank of Jabez and a plaintiff pressing enforcement of Section 1071 of the Dodd‑Frank Act, described personal experiences with discrimination that motivated her to seek a minority depository institution charter and to press for small‑business lending data collection. “Collecting and reporting this data may cost banks a little bit more, but it protects consumers,” Young said.

Several members pressed for broader reforms and implementation steps. Ranking Member Dr. Foster emphasized that reforms must not sacrifice safety and soundness, and he highlighted other priorities—deposit insurance, discount window reforms and assistance for small institutions’ technology costs. Members from both parties described proposals under consideration: statutory shot clocks or automatic escalation for overdue applications, phased capital for de novo banks, and modernization of competitive analysis in merger reviews to reflect nonbank competitors.

Committee action and next steps: the committee has advanced the Promoting New Bank Formation Act (referred to during the hearing as HR 478) out of committee, and the chair said he would press House leadership to schedule the congressional review act (CRA) resolution—which the chair said has passed the Senate—to block the prior merger guidance from being reinstated. No formal votes took place during the hearing itself. Members indicated they will continue legislative and oversight work to (1) set or enforce timelines for agency action, (2) require agencies to streamline application procedures and public‑comment triage, and (3) consider phased capital relief for qualifying de novo banks.

The hearing record contains detailed testimony and examples committee members said they will use in drafting or amending legislation and in oversight of federal banking agencies.