Wanted in 2025: More New Banks

The new head of the Federal Deposit Insurance Corp. telegraphed more openness to de novo formation as part of a broader shift in the regulator’s stance toward bank M&A under the second Trump administration. 

Bank mergers have taken longer to close in recent years, something that Acting Chair Travis Hill characterized as an attempt to artificially slow industry consolidation. But delays in the approval process for mergers do nothing to address the larger underlying reasons for bank consolidation; chief among those are rising compliance costs, ever-increasing technology expenses and a lack of de novo formation. 

“Just from a statistical standpoint, the lack of new charters is really what is causing the reduction in bank charters,” Hill said in a virtual Q&A session hosted by Intrafi at Bank Director’s Acquire or Be Acquired Conference. “The pace at which existing charters are disappearing hasn’t really changed that much, but what has changed very dramatically is the amount of new charters entering the system.” 

New bank charters fell dramatically after the 2008 financial crisis, due largely to higher start-up costs, weaker investor interest and tighter industry margins. Just under half of directors and executives who took Bank Director’s 2025 Bank M&A Survey said they wanted to see more de novo formation, with half of those respondents saying 10 to 25 new bank charters per year would be ideal. 

Hill did not specify how the FDIC might address that issue, but said, “We have to think creatively about how we can get more individuals into the system.”  

An atmosphere of optimism pervaded the first day of the conference, which brought together more than 1,800 bank executives and directors in Phoenix, Arizona. Speakers and panelists highlighted their expectations for the year ahead, including brighter prospects for earnings and loan growth, a lighter regulatory touch and more robust M&A activity. 

Tom Michaud, CEO of the investment banking firm Keefe, Bruyette & Woods, foreshadowed some of Hill’s remarks during his own comments, highlighting the closing times for bank mergers in recent years. The FDIC took a median 187 days to approve merger applications during the first Trump administration and a median 265 days during the Biden administration, representing a 42% increase in closing times. 

In addition to a friendlier regulatory environment, banks have also built up the capital needed to invest in their business. “The industry building capital probably gets me most excited because that’s future opportunity,” Michaud said. That’s the ability to buy things, whether it’s assets, portfolios or possibly other companies. I think that’s a real positive for the industry, as well as for investors in the industry.” 

Hill said the FDIC plans to replace a statement of policy on bank mergers that it issued in 2024. Among other things, that statement outlined how the agency would evaluate potential anticompetitive effects of mergers, particularly in rural markets, and stated that deals resulting in an organization of $100 billion in assets or larger would be subject to additional scrutiny. 

Among other wide-ranging priorities he outlined, Hill also zeroed in on the issue of debanking. Conservative groups more generally have argued in recent years that a focus on environmental and social issues has led banks to reject or boot out politically disfavored customers, such as gun makers, under the guise of concern about reputational risk. 

In his question-and-answer session with Intrafi’s Rob Blackwell, Hill focused largely on the impact to cryptocurrency-related businesses. 

“The approach over the last couple of years has been that if any institution wants to do anything related to digital assets or blockchain or anything related to that, that they need to go to their examiners and, in effect, get permission from their examiner,” he said. “As a general rule, I don’t think we, as a regulator, should be making value judgments on banking different types of industries, which I think in effect is what has happened here.”

This article has been updated to more accurately reflect some of Tom Michaud’s comments.