U.S. lawmakers examine high costs of starting community banks

Lawmakers and regulators recently met in Richmond, Kentucky, to discuss the challenges of establishing new community banks. The House Financial Services Subcommittee on Financial Institutions examined the Main Street Capital Access Act, which aims to address bank formation, capital treatment, and regulatory thresholds.

Data from the Federal Deposit Insurance Corp. shows a significant decline in new bank openings; while the annual number of new banks was at least 93 between 1995 and 2007, only 86 have opened in total between 2010 and 2024. However, the Office of the Comptroller of the Currency reported receiving 40 de novo applications over the last 18 months, a notable increase from the average of fewer than four annual applications seen between 2011 and 2014. Of these, 23 involve digital asset activity.

A primary focus of the hearing was the high cost of entry. Kyle Aud, CEO of Cornerstone Community Bank, noted that his institution required approximately $27 million in capital from over 230 shareholders to launch. Cornerstone became Kentucky’s first newly chartered bank since 2009.