New Bank Charters Fell From 149 a Year to Five After Dodd-Frank, Former House Banking Chair Says

America used to start roughly 149 new banks a year. Now it starts about five.

That is the finding of an analysis of FDIC data by Jeb Hensarling, who chaired the House Financial Services Committee from 2013 to 2019 and is now an economics fellow at the Cato Institute, and Michael Solon, a senior fellow at the Hudson Institute. They put the blame on the 2010 Dodd-Frank Act.

The numbers

From 1990 until the 2008 financial crisis, an average of 149 new banks were chartered each year, according to the authors' analysis. Between 2011 and 2025, the average was five.

The authors also count 149 more banks failed than formed since Dodd-Frank passed. For every 100 banks that merged, liquidated or failed between 1990 and 2008, 32 new ones started. From 2009 to 2024, that figure was 3.4.

The customer base has shrunk with it. De novo banks, the formal term for newly chartered institutions, averaged 4.9 million accounts a year between 2000 and 2007. Between 2011 and 2025, the authors say, that dropped to about 500,000.

FDIC Chairman Travis Hill has described the trend in blunt terms: "the de novo rate has fallen off a cliff."

The cost of starting a bank

Hensarling and Solon say the startup math changed. New banks often open with only about $20 million in assets. The initial capital needed to launch one has risen from $11.8 million to $29.6 million since Dodd-Frank, more than doubling.

Compliance falls hardest on the smallest institutions. Four years after the law passed, the Federal Reserve reported that banks with under $100 million in assets spent 8.7 percent of noninterest expenses on regulatory compliance. Larger banks spent 2.9 percent.

The authors argue that a fixed compliance load is a far bigger hurdle for a bank that starts with a handful of employees than for a large institution with a standing legal department.

What the law's sponsors said

Dodd-Frank was written mainly to rein in banks considered "too big to fail" and prevent a repeat of 2008. Its sponsors said small banks would be spared.

Sen. Christopher Dodd, a Connecticut Democrat, said during debate that community banks "were never a source of the problems in the residential mortgage market at all." Rep. Barney Frank, a Massachusetts Democrat, said the bill was "far better and more responsive to the needs of small banks" than the alternative bill.

Years later, Frank conceded part of the other side's point. "Small banks are spending too much money to show that they are in compliance," he said, according to the authors.

Why small banks matter

Hensarling and Solon say community banks tend to practice relationship banking. Because loan officers know their borrowers, the authors write, these banks can back companies with strong potential but weak financials. They say community banks provide 40 percent of small-business lending.

The op-ed's argument is that fewer new banks means fewer of those lenders, and that the regulations "remain a burden across the entire banking sector, needlessly depressing the economy."

What the data does and does not show

The charter counts and capital figures come from FDIC data, and the compliance-cost comparison comes from the Federal Reserve. The link between those trends and Dodd-Frank itself is the authors' argument. They note that the collapse in bank formation tracks the period after the law took effect, and they cite the Fed's cost data and Hill's remark in support.

No investigation or legislative action tied to the op-ed has been announced. Hill's agency supplies the chartering data and sits at the center of any change in how new banks are approved. Whether he or Congress moves to lower the entry barriers the authors describe remains an open question.