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For Immediate Release
March 21, 2017
ABA Media Contact: Jeff Sigmund
(202) 663-5439
Email: jsigmund@aba.com
Follow us on Twitter: @ABABankers

ABA Testifies on Lack of New Bank Charters

 

​WASHINGTON —  The drought of new bank charters is strong evidence that the economics for new community banks don’t work, according to testimony from the American Bankers Association before the House Financial Services Subcommittee on Financial Institutions and Consumer Credit today.
 
Kenneth L. Burgess, Jr., chairman of FirstCapital Bank of Texas in Midland, Texas, testified on behalf of ABA. Burgess is also chairman-elect of ABA.

Burgess testified that new banks (de novos) help fill gaps in the provision of banking services, increase competition and ultimately strengthen the community banking sector.  While the FDIC announced welcome supervisory changes last year to help prospective de novos, underlying barriers to entry, including capital hurdles, unreasonable regulatory expectations on directors, funding constraints and an inflexible regulatory infrastructure, discourage new bank charters.
 
“Investors have options,” Burgess said.  “If the impediments to starting a new bank are too great, they will invest elsewhere. It’s time to think differently to encourage new banks by requiring less capital, reducing regulatory burden, permitting greater flexibility in business plans and lifting funding restrictions.”
 
Burgess testified that the regulatory challenges banks face every day are the same as those that make starting a new bank nearly impossible.
 
“Sadly, the forces that have acted to stop new bank charters are the same ones that have led to the dramatic consolidation of the banking industry – excessive and complex regulations that are not tailored to the risks of specific institutions,” Burgess said.  “This – not the local economic conditions – is often the tipping point that drives small banks to merge with another one and is a barrier to entry for new banks.”
 
Burgess noted that since the Dodd-Frank Act was enacted, 1,917 banks (or 24 percent of the industry) have disappeared compared with only six de novo banks.
 
For a copy of Burgess’ full testimony, please click here.
 
 
The American Bankers Association is the voice of the nation’s $17 trillion banking industry, which is composed of small, regional and large banks that together employ more than 2 million people, safeguard $13 trillion in deposits and extend more than $9 trillion in loans.
 
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