Promoting New and Diverse Depository Institutions Act
Summary
House Report 117–229, dated January 20, 2022, is the report of the Committee on Financial Services on H.R. 4590, the Promoting New and Diverse Depository Institutions Act, which the committee reports favorably with an amendment. The amendment would require the Federal banking regulators to jointly conduct a study about the challenges faced by proposed depository institutions seeking de novo depository institution charters and, not later than 18 months after enactment, to submit and publish an analysis, findings and legislative recommendations. It would also require a strategic plan based on the study. The report states that Representative Auchincloss introduced H.R. 4590 on July 21, 2021, and that the committee ordered it reported favorably on July 29, 2021, by a voice vote.
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“Promoting New and Diverse Depository Institutions Act.”
Original at www.govinfo.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/crpt-crpt-117hrpt229-crpt-117hrpt229/
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117TH CONGRESS REPORT
" HOUSE OF REPRESENTATIVES !
2d Session 117–229
PROMOTING NEW AND DIVERSE DEPOSITORY
INSTITUTIONS ACT
JANUARY 20, 2022.—Committed to the Committee of the Whole House on the State
of the Union and ordered to be printed
Ms. WATERS, from the Committee on Financial Services,
submitted the following
R E P O R T
[To accompany H.R. 4590]
[Including cost estimate of the Congressional Budget Office]
The Committee on Financial Services, to whom was referred the
bill (H.R. 4590) to require the Federal banking regulators to jointly
conduct a study and develop a strategic plan to address challenges
faced by proposed depository institutions seeking de novo deposi-
tory institution charters; and for other purposes, having considered
the same, reports favorably thereon with an amendment and rec-
ommends that the bill as amended do pass.
CONTENTS
Page
Purpose and Summary ............................................................................................ 2
Background and Need for Legislation .................................................................... 3
Section-by-Section Analysis of the Legislation ...................................................... 4
Hearings ................................................................................................................... 5
Committee Consideration ........................................................................................ 5
Committee Votes ...................................................................................................... 5
Committee Oversight Findings ............................................................................... 5
Statement of Performance Goals and Objectives .................................................. 5
New Budget Authority and C.B.O. Cost Estimate ................................................ 5
Committee Cost Estimate ....................................................................................... 7
Federal Mandates Statement ................................................................................. 7
Advisory Committee Statement .............................................................................. 7
Applicability to Legislative Branch ........................................................................ 7
Congressional Earmarks, Limited Tax Benefits, and Limited Tariff Benefits ... 7
Duplicative Federal Programs ................................................................................ 8
The amendment is as follows:
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Strike all after the enacting clause and insert the following:
29–006
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2
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Promoting New and Diverse Depository Institutions
Act’’.
SEC. 2. STUDY AND STRATEGIC PLAN.
(a) IN GENERAL.—The Federal banking regulators shall jointly—
(1) conduct a study about the challenges faced by proposed depository institu-
tions, including proposed minority depository institutions, seeking de novo de-
pository institution charters; and
(2) submit to the Committee on Financial Services of the House of Represent-
atives and the Committee on Banking, Housing, and Urban Affairs of the Sen-
ate and publish publically, not later than 18 months after the date of the enact-
ment of this section—
(A) an analysis based on the study conducted pursuant to paragraph (1);
(B) any findings from the study conducted pursuant to paragraph (1); and
(C) any legislative recommendations that the Federal banking regulators
developed based on the study conducted pursuant to paragraph (1).
(b) STRATEGIC PLAN.—
(1) IN GENERAL.—Not later than 18 months after the date of the enactment
of this section, the Federal banking regulators shall jointly submit to the Com-
mittee on Financial Services of the House of Representatives and the Com-
mittee on Banking, Housing, and Urban Affairs of the Senate and publish pub-
lically a strategic plan based on the study conducted pursuant to subsection (a)
and designed to help proposed depository institutions (including proposed mi-
nority depository institutions) successfully apply for de novo depository institu-
tion charters in a manner that promotes increased availability of banking and
financial services, safety and soundness, consumer protection, community rein-
vestment, financial stability, and a level playing field.
(2) CONTENTS OF STRATEGIC PLAN.—The strategic plan described in paragraph
(1) shall—
(A) promote the chartering of de novo depository institutions, including—
(i) proposed minority depository institutions; and
(ii) proposed depository institutions that could be certified as commu-
nity development financial institutions; and
(B) describe actions the Federal banking regulators may take that would
increase the number of depository institutions located in geographic areas
where consumers lack access to a branch of a depository institution.
(c) PUBLIC INVOLVEMENT.—When conducting the study and developing the stra-
tegic plan required by this Act, the Federal banking regulators shall invite com-
ments and other feedback from the public to inform the study and strategic plan.
(d) DEFINITIONS.—In this Act:
(1) DEPOSITORY INSTITUTION.—The term ‘‘depository institution’’ has the
meaning given in section 3 of the Federal Deposit Insurance Act, and includes
a ‘‘Federal credit union’’ and a ‘‘State credit union’’ as such terms are defined,
respectively, under section 101 of the Federal Credit Union Act.
(2) COMMUNITY DEVELOPMENT FINANCIAL INSTITUTION.—The term ‘‘community
development financial institution’’ has the meaning given in section 103 of the
Riegle Community Development and Regulatory Improvement Act of 1994.
(3) FEDERAL BANKING REGULATORS.—The term ‘‘Federal banking regulators’’
means the Board of Governors of the Federal Reserve System, the Comptroller
of the Currency, the Federal Deposit Insurance Corporation, the National Cred-
it Union Administration, and the Director of the Bureau of Consumer Financial
Protection.
(4) MINORITY DEPOSITORY INSTITUTION.—The term ‘‘minority depository insti-
tution’’ has the meaning given in section 308(b) of the Financial Institutions Re-
form, Recovery, and Enforcement Act of 1989.
PURPOSE AND SUMMARY
On July 21, 2021, Representative Auchincloss introduced H.R.
4590, the Promoting New and Diverse Depository Institutions Act,
which would require Federal banking regulators to conduct an 18-
month study examining challenges prospective de novo depository
institutions face. (A de novo depository institution is a newly char-
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tered depository institution.) The bill would also require Federal
banking regulators to develop a strategic plan based on the study
to promote the creation of newly chartered depository institutions,
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3
especially minority depository institutions (MDIs) and community
development financial institutions (CDFIs), in a manner that pro-
motes increased access to financial services, including in banking
deserts, as well as safety and soundness, consumer protection, and
community reinvestment.
BACKGROUND AND NEED FOR LEGISLATION
Since the 1980s, the banking industry has steadily consolidated.1
In 1985, there were more than 18,000 banks; today, there are fewer
than 4,500.2 There has been similar consolidation of credit unions:
in 1985, there were more than 15,000 credit unions; today, there
are a little more than 5,000 credit unions.3 Moreover, despite a
mandate that banking regulators work to preserve the number of
MDIs and encourage the creation of new MDIs pursuant to Section
308 of Financial Institutions Reform, Recovery, and Enforcement
Act of 1989 (FIRREA), there has been a one- third decline in the
number of MDIs since the 2008 financial crisis, with a more steep
52 percent decline in the number of Black-owned banks.4
While the industry consolidation has occurred over the past few
decades, the formation of de novo depository institutions has
slowed in recent years. Between 2009 and 2019, 64 new banks
were chartered, compared to 1,837 new banks that were chartered
between 1998 and 2008. There have been a range of reasons given
for this development. For example, while some have suggested
these developments are driven by regulatory factors, Federal Re-
serve research suggests there may be a stronger correlation be-
tween the number of new banks formed in recent years and the in-
terest rate environment and other non-regulatory factors.5 Even at
times when more de novo banks are being chartered, research has
shown that new banks are financially fragile, in some cases failing
at more than twice the rate established banks fail.6
While Federal banking regulators have advanced their own ini-
tiatives in recent years to support MDIs and CDFIs as well as the
formation of de novo depository institutions,7 regulators have not
conducted a joint study or detailed a strategic plan on steps that
could be taken to encourage the formation of new depository insti-
tutions, including MDIs and CDFI depository institutions. H.R.
4590 would require them to do so. This effort to encourage the for-
mation of de novo depository institutions, especially MDIs and
CDFIs, complements recently enacted legislation to shore up and
1 See Testimony of Sarah Edelman, Center for American Progress, before the House Sub-
committee on Financial Institutions and Consumer Credit hearing entitled, Ending the De Novo
Drought: Examining the Application Process for De Novo Financial Institutions (Mar. 21, 2017).
2 FDIC, BankFind Suite: Find Annual Historical Bank Data (accessed July 22, 2021), and
FDIC, Quarterly Banking Profile (Third Quarter 2021).
3 NCUA, 1985 Annual Report (April 1986), and NCUA, Quarterly Data Summary Reports
(Third Quarter 2021).
4 Specifically, in 2008, there were 215 MDI banks, including 42 Black-owned banks, and today,
there are 142 MDI banks, including only 20 Black-owned banks. See FDIC, Minority Depository
Institutions Program—Historical Data Year-by-Year 2001–2020 (accessed July 22, 2021). As of
2013, there were 805 MDI credit unions compared to 527 MDI credit unions today. See NCUA,
Minority Depository Institution Preservation (accessed July 22, 2021).
5 Robert M. Adams and Jacob P. Gramlich, Federal Reserve Board, Where Are All the New
Banks? The Role of Regulatory Burden in New Charter Creation, (Dec. 16, 2014).
6 See Yan Lee and Chiwon Yom, FDIC, The Entry, Performance, and Risk Profile of De Novo
Banks, (Apr. 7, 2016).
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7 See, e.g., FDIC, FDIC Rescinds De Novo Time Period Extension; Releases Supplemental
Guidance on Business Planning (Apr. 6, 2016); FDIC, Investing in the Future of Mission-Driven
Banks—A Guide to Facilitating New Partnerships; OCC, OCC Marks the First Anniversary of
Project Reach (Jul. 15, 2021).
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4
strengthen existing MDIs and CDFIs, specifically through $12 bil-
lion in capital investment and grant programs to support MDIs as
well as CDFIs enacted into law in December 2020.8 In 2021, the
Department of Treasury and the CDFI Fund announced the deploy-
ment of nearly $10 billion of these funds to support these diverse
and mission-driven community financial institutions.
Research and testimony received by the House Financial Services
Committee has shown that MDIs and CDFIs are far more likely to
serve underbanked communities of color and LMI communities
than large banks and non-minority community banks.9 For exam-
ple, MDIs are far more likely to be located in LMI communities
with high representation of minorities, and loan data confirms that
MDIs lend to minorities at dramatically higher rates. Indeed, per
the FDIC, the median share of estimated service area population
living in LMI census tracts is 69% for African American MDIs, 45%
for Asian American MDIs, and 30% for Hispanic American MDIs,
compared to 26% for non-MDI noncommunity banks, and 21% for
non-MDI metro-area nonfarm community banks.10 Mortgage and
small business lending disparities are similar across banks types.11
Furthermore, through May 2021, CDFIs provided 1.3 million Pay-
check Protection Program (PPP) loans to small business totaling
over $30 billion in support.12 The average PPP loan size CDFIs
provided was $21,653 compared to a program-wide average of
$41,560, and nearly 40% of CDFI loans reached business in LMI
communities, compared to 28% for the overall program. Given this
track record, supporting existing MDIs and CDFIs and encouraging
the creation of de novo MDIs and CDFIs, as provided by H.R. 4590,
is critical to help ensure underserved communities have access to
affordable banking products and services, as well as emergency
support from the government through programs like PPP.
H.R. 4590 is supported by the following organizations: American
Bankers Association, California & Nevada Credit Union Leagues,
Community Development Bankers Association, Credit Union Na-
tional Association, Inclusiv, Independent Community Bankers As-
sociation, National Association of Federally-Insured Credit Unions,
National Bankers Association, and National Community Reinvest-
ment Coalition.
SECTION-BY-SECTION ANALYSIS
Section 1. Short title
This section establishes the short title of the bill as ‘‘Promoting
New and Diverse Depository Institutions Act.’’
Section 2. Study and strategic plan
This section requires the Federal Deposit Insurance Corporation
(FDIC), Board of Governors of the Federal Reserve System (Fed),
8 House Financial Services Committee, One pager on the provisions providing Emergency Sup-
port for CDFIs and MDIs in the December COVID–19 stimulus package (Dec. 2020).
9 House Financial Services Committee hearing, Promoting Inclusive Lending During the Pan-
demic: Community Development Financial Institutions and Minority Depository Institutions
(Jun. 3, 2021).
10 FDIC, 2019 Minority Depository Institutions: Structure, Performance, and Social Impact
(2019).
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11 Id.
12 Small Business Administration, PPP data (accessed Jan. 12, 2022). See also Testimony of
John Holdsclaw IV, Executive Vice President, National Cooperative Bank and President, CDFI
Coalition before the Senate Committee on Banking, Housing, and Urban Affairs (Jan. 5, 2021).
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5
Office of Comptroller of the Currency (OCC), National Credit Union
Administration (NCUA), and Consumer Financial Protection Bu-
reau (CFPB) to conduct an 18-month study examining the chal-
lenges faced by proposed de novo depository institutions, including
de novo MDIs. The regulators must report to Congress and publish
their analysis, findings, and legislative recommendations. It also
requires those banking regulators to produce a strategic plan based
on the study to encourage the formation of de novo depository insti-
tutions, including de novo MDIs and CDFIs, in a manner that pro-
motes the availability of banking and financial services (especially
in banking deserts), safety and soundness, consumer protection,
community reinvestment, financial stability, and a level playing
field. This section further requires the regulators to invite public
feedback to inform the study and strategic plan.
HEARINGS
For the purposes of section 3(c)(6) of House rule XIII, the Com-
mittee on Financial Services’ on May 19, 2021 held a hearing to
consider H.R. 4590 entitled ‘‘Oversight of Prudential Regulators:
Ensuring the Safety, Soundness, Diversity, and Accountability of
Depository Institutions.’’
COMMITTEE CONSIDERATION
The Committee on Financial Services met in open session on
July 29, 2021, and ordered H.R. 4590 to be reported favorably to
the House with an amendment in the nature of a substitute by a
voice vote.
COMMITTEE VOTES AND ROLL CALL VOTES
In compliance with clause 3(b) of rule XIII of the Rules of the
House of Representatives, the Committee advises that no roll call
votes occurred during consideration of H.R. 4590.
STATEMENT OF OVERSIGHT FINDINGS AND RECOMMENDATIONS OF THE
COMMITTEE
In compliance with clause 3(c)(1) of rule XIII and clause 2(b)(1)
of rule X of the Rules of the House of Representatives, the Commit-
tee’s oversight findings and recommendations are reflected in the
descriptive portions of this report.
STATEMENT OF PERFORMANCE GOALS AND OBJECTIVES
Pursuant to clause (3)(c) of rule XIII of the Rules of the House
of Representatives, the goals of H.R. 4590 are to examine the chal-
lenges prospective de novo depository institutions face and promote
the creation of newly chartered depository institutions, especially
MDIs and CDFIs, in order to increase access to financial services
as well as safety and soundness, consumer protection, and commu-
nity reinvestment.
NEW BUDGET AUTHORITY AND CBO COST ESTIMATE
Pursuant to clause 3(c)(2) of rule XIII of the Rules of the House
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of Representatives and section 308(a) of the Congressional Budget
Act of 1974, and pursuant to clause 3(c)(3) of rule XIII of the Rules
of the House of Representatives and section 402 of the Congres-
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6
sional Budget Act of 1974, the Committee has received the fol-
lowing estimate for H.R. 4590 from the Director of the Congres-
sional Budget Office:
U.S. CONGRESS,
CONGRESSIONAL BUDGET OFFICE,
Washington, DC, November 29, 2021.
Hon. MAXINE WATERS,
Chairwoman, Committee on Financial Services,
House of Representatives, Washington, DC.
DEAR MADAM CHAIRWOMAN: The Congressional Budget Office
has prepared the enclosed cost estimate for H.R. 4590, the Pro-
moting New and Diverse Depository Institutions Act.
if you wish further details on this estimate, we will be pleased
to provide them. The CBO staff contact is Stephen Rabent.
Sincerely,
PHILLIP L. SWAGEL,
Director.
Enclosure.
H.R. 1277, Improving Corporate Governance Through Diversity Act of 2021
As ordered reported by the House Committee on Financial Services on April 21, 2021
By Fiscal Year, Millions of Dollars 2021 2021-2026 2021-2031
Direct Spending (Outlays) 0 0 0
Revenues 0 0 0
Increase or Decrease H
in the Deficit 0 0 0
Spending Subject to • not estimated
Appropriation (Outlay_a;..)_ _ _ _ _,_~-,-----..,,---,-~-=.,---,--------- ,--.,.....-----
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H.R. 4590 would direct the Federal Deposit Insurance Corporate
(FDIC), the National Credit Union Administration (NCUA), the
Comptroller of the Currency (OCC), the Consumer Financial Pro-
tection Bureau (CFPB), and the Federal Reserve to study the chal-
lenges faced by new depository institutions seeking a charter.
Those banking regulators also would be required to jointly issue a
strategic plan to increase the number of entities applying for new
depository institution charters.
The operating costs for the CFPB, FDIC, NCUA, and OCC are
classified in the federal budget as direct spending. Using informa-
tion from some of those agencies, CBO estimates that each agency
would require about two employees to complete the bill’s require-
ments over a two-year period, increasing gross direct spending by
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$4 million over the 2022–2031 period. However, the NCUA and the
OCC collect fees from financial institutions to offset their operating
costs; those fees are treated as reductions in direct spending. Thus,
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7
on net, CBO estimates that enacting the bill would increase direct
spending by $2 million over the same period.
Costs incurred by the Federal Reserve reduce remittances to the
Treasury, which are recorded in the budget as revenues. CBO esti-
mates that enacting H.R. 4590 would decrease revenues by $1 mil-
lion over the 2022–2031 period.
If the OCC and NCUA increased annual fee collections to offset
the costs associated with implementing the bill, H.R. 4590 would
increase the cost of an existing private-sector mandate on entities
required to pay those fees. CBO estimates that the incremental
cost of the mandate would be small and would fall below the
thresholds established in the Unfunded Mandates Reform Act
(UMRA) for private-sector mandates ($170 million in 2021, ad-
justed annually for inflation).
H.R. 4590 contains no intergovernmental mandates as defined in
UMRA.
The CBO staff contacts for this estimate are Stephen Rabent (for
federal costs), Nathaniel Frentz (for revenues), and Fiona Forrester
(for mandates). The estimate was reviewed by H. Samuel
Papenfuss, Deputy Director of Budget Analysis.
COMMITTEE COST ESTIMATE
Clause 3(d)(1) of rule XIII of the Rules of the House of Rep-
resentatives requires an estimate and a comparison of the costs
that would be incurred in carrying out H.R. 4590. However, clause
3(d)(2)(B) of that rule provides that this requirement does not
apply when the committee has included in its report a timely sub-
mitted cost estimate of the bill prepared by the Director of the Con-
gressional Budget Office under section 402 of the Congressional
Budget Act.
UNFUNDED MANDATE STATEMENT
Pursuant to Section 423 of the Congressional Budget and Im-
poundment Control Act (as amended by Section 101(a)(2) of the Un-
funded Mandates Reform Act, Pub. L. 104–4), the Committee
adopts as its own the estimate of federal mandates regarding H.R.
4590, as amended prepared by the Director of the Congressional
Budget Office.
ADVISORY COMMITTEE
No advisory committees within the meaning of section 5(b) of the
Federal Advisory Committee Act were created by this legislation.
APPLICATION OF LAW TO THE LEGISLATIVE BRANCH
Pursuant to section 102(b)(3) of the Congressional Accountability
Act, Pub. L. No. 104–1, H.R. 4590, as amended, does not apply to
terms and conditions of employment or to access to public services
or accommodations within the legislative branch.
EARMARK STATEMENT
In accordance with clause 9 of rule XXI of the Rules of the House
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of Representatives, H.R. 4590 does not contain any congressional
earmarks, limited tax benefits, or limited tariff benefits as de-
scribed in clauses 9(e), 9(f), and 9(g) of rule XXI.
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8
DUPLICATION OF FEDERAL PROGRAMS
Pursuant to clause 3(c)(5) of rule XIII of the Rules of the House
of Representatives, the Committee states that no provision of H.R.
4590 establishes or reauthorizes a program of the Federal Govern-
ment known to be duplicative of another federal program, a pro-
gram that was included in any report from the Government Ac-
countability Office to Congress pursuant to section 21 of Public
Law 111–139, or a program related to a program identified in the
most recent Catalog of Federal Domestic Assistance.
Æ
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