Legislation Aims to Boost Community Banking, Stop Decline in Banking Options for Many Mississippians

WASHINGTON, D.C. – U.S. Senator Cindy Hyde-Smith (R-Miss.) today introduced a bill to encourage the formation of new banks in underserved and rural areas by easing federal regulatory restrictions that have stifled bank and capital availability in Mississippi and other states.

The Promoting Access to Capital in Underbanked Communities Act (S.3937) would encourage the formation of new de novo banks by instituting a three-year phase-in period during which newly-chartered banks would be given time to meet less stringent capital requirements as they adapt to a business model that aligns with the needs and circumstances of the communities they serve.

“We need more community banks in our towns that understand the needs of everyday Mississippians,” Hyde-Smith said.  “We need to find a path to overcome stifling banking regulators and other factors that limit banking options in rural and underserved communities.  This legislation marks a step toward expanding credit accessibility for Mississippians, including small business owners, entrepreneurs, farmers, and the list goes on.”

Mississippi has not had a newly chartered bank since 2007.  Instead, Mississippi lost more than 35 state-chartered banking institutions mostly in underserved areas, decreasing from 97 banking institutions to just 62 in just 15 years—an alarming 36 percent reduction.  This decline mirrors an overall national decline since the 2008 financial crisis and subsequent trend in bank consolidations.  The pandemic-fueled economic recession worsened the problem.

A recent Federal Reserve study shows that declines in bank branches disproportionately hit rural communities, with 794 rural counties nationally losing a combined 1,553 bank branches over the five-year period.  

The Mississippi Bankers Association (MBA) and American Bankers Association (ABA) have endorsed the Hyde-Smith legislation.

“Local banks are critical to the economic success of any community. Unfortunately, the country has been dealing with a decade-long bank consolidation wave that is particularly impactful on rural communities.  Senator Hyde-Smith’s new bill would encourage new bank formations in rural communities by making important temporary regulatory adjustments that can help new rural banks establish themselves,” said Gordon Fellows, MBA President and CEO.  “The Mississippi Bankers Association fully supports this legislation, which has the potential to unlock economic growth and investment opportunities in communities all around our state.  Thank you, Senator Hyde-Smith for continuing to champion rural communities.”

“We applaud Sen. Hyde-Smith for introducing this important legislation to promote new bank formation in rural and underserved areas.  This common-sense, pro-growth solution would expand banking access for individuals and small- and medium-sized businesses across the country, which is a big win for bank customers and their communities,” said Rob Nichols, ABA President and CEO.

A companion measure (HR.758), introduced last year by U.S. Representative Andy Barr (R-Ky.), has the endorsement of the ABA and the Independent Community Bankers Association.

Read a one-page summary of the Promoting Access to Capital in Underbanked Communities Act here.