Why Midterm Elections Are Unlikely to End the Era of New Bank Charters

Bankers, fintech executives and investors are increasingly asking whether a Democratic victory in the midterm elections, or a Democratic presidential win in 2028, could stop new banks from receiving charters.

The likely answer is no. A change in congressional control could bring tougher oversight, more hearings and additional scrutiny of regulators. However, it would not immediately remove the officials currently leading the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation or the Federal Reserve’s supervision division.

The 2028 presidential election could have a greater impact because the winner would influence the next generation of financial regulators. Even so, a Democratic administration would more likely slow and narrow the approval process than eliminate new bank formations altogether.

Key Takeaways for Bank Charter Applicants

• Current leaders at the OCC, FDIC and Federal Reserve are expected to remain in place after the midterm elections.
• A Democratic majority in Congress could increase hearings, subpoenas and document requests, but would have limited authority to reverse existing agency policies.
• A new president in 2029 could change the pace and conditions of charter approvals, although a complete halt is unlikely.
• The GENIUS Act requires the OCC to act on certain stablecoin issuer applications within 120 days, or the applications may be treated as approved.

Regulators Are Already Encouraging New Bank Formation

The officials responsible for today’s chartering environment have taken several steps to make it easier for qualified applicants to establish new banks. A change in congressional leadership would not automatically alter that direction.

OCC Focuses on De Novo Bank Charters

Comptroller Jonathan Gould made the revival of de novo bank chartering a major priority after taking office in July 2025. The increase in applications suggests that the OCC has made meaningful progress on that goal.

By August 2026, the OCC had received approximately 40 charter applications over an 18-month period. That compares with 48 applications during the entire period from 2011 through 2024. The agency also reported 14 de novo approvals through early August 2026, compared with nine approvals during the four years from 2021 through 2024.

These figures show how significantly the chartering environment has changed. The OCC has become more receptive to new banking models, including applications involving digital assets and other emerging financial services.

FDIC Introduces a Two-Phase Review Process

FDIC Chairman Travis Hill has also made new bank formation a priority. In early 2026, Hill told lawmakers that the agency was working to improve the deposit insurance application process and encourage more applicants to enter the banking industry.

The FDIC later divided its review process into two stages. During the first stage, the agency evaluates an applicant’s business plan, financial projections and proposed management team. It also interviews organizers and decides within 120 days whether to issue a conditional authorization.

The second stage gives organizers up to 12 months to complete tasks such as finalizing corporate documents, implementing compliance policies and preparing operational systems. The bank must then receive final approval and complete a pre-opening examination.

This approach gives applicants earlier clarity about their prospects before they commit substantial funds to capital raising, hiring and technology. The 120-day timetable also aligns with the period the OCC generally uses for conditional charter decisions.

Federal Reserve Calls for a More Efficient Process

Federal Reserve Vice Chair for Supervision Michelle Bowman has questioned whether the existing application process has become an unnecessary obstacle to new bank formation. Her background as a community banker and state banking commissioner has informed her views on the need for practical and predictable supervision.

Bowman has also criticized aspects of the Fed’s bank merger analysis, describing it as outdated and harmful to community banks. She has urged regulators to clarify capital expectations, follow reasonable processing schedules and use conditional approvals when appropriate.

The Federal Financial Institutions Examination Council has likewise reaffirmed support for de novo banks. The Federal Reserve, however, has generally moved more cautiously than the OCC and FDIC.

Congress Can Increase Oversight, but It Cannot Easily Reverse Charter Decisions

A Democratic majority in either chamber of Congress would have meaningful oversight powers. Committee leaders could schedule more hearings, request additional records and issue subpoenas when agencies do not cooperate. A Democratic Senate could also delay or reject future nominees.

However, Congress would have limited ability to overturn individual charter decisions or remove current agency leaders.

Existing Agency Leaders Would Remain in Office

Bank charter applications are decided under existing laws and policies established by agency leadership. Congress cannot simply shorten the terms of confirmed officials. Gould, Hill and Bowman would remain in their positions despite a shift in congressional control, absent extraordinary action such as impeachment.

The Congressional Review Act Would Not Apply

Individual charter decisions are not agency rulemakings. As a result, the Congressional Review Act would not provide Congress with a direct mechanism to invalidate them.

Budget Restrictions Would Have Limited Effect

The OCC, Federal Reserve and FDIC do not rely on ordinary annual congressional appropriations in the same way many federal agencies do. Therefore, lawmakers would have fewer opportunities to use the budget process to immediately stop charter approvals.

The most likely result of a Democratic congressional majority would be additional scrutiny rather than a complete change in policy. Applicants in politically sensitive areas could face more conditions, longer review periods and closer public examination.

A 2028 Democratic Presidency Could Change the Pace of Approvals

The presidential election could have a more direct effect on bank chartering. A new president would have greater influence over agency leadership, particularly at the OCC and FDIC.

• The president can remove the comptroller, provided the reasons are communicated to the Senate.
• Recent court decisions may give the president greater authority to replace leaders of independent agencies, including potential changes at the FDIC.
• Federal Reserve governors have stronger removal protections and generally can be removed only for cause.

As a result, a Democratic administration could potentially install new leadership at the OCC and FDIC within months of taking office in January 2029. Changes at the Federal Reserve would probably happen more slowly.

New agency leaders could apply closer scrutiny to cryptocurrency companies, commercial firms seeking bank charters and applicants with significant political or business connections. They could also impose stricter approval conditions or take longer to decide pending applications.

Still, an administration cannot cancel an existing charter simply because it disagrees with the decision that granted it. Regulators may close a bank only on statutory grounds, such as insolvency or an unsafe or unsound condition.

A future OCC could supervise recently chartered institutions more closely. Conditional approvals for banks that have not opened could also expire if applicants fail to meet their requirements. But the charter of an operating bank would not ordinarily be subject to cancellation based solely on a change in political leadership.

The GENIUS Act Creates a Bipartisan Foundation for Stablecoin Charters

The GENIUS Act, or the Guiding and Establishing National Innovation for U.S. Stablecoins Act, offers an additional safeguard for certain new financial institutions. The law received support from Democrats in both chambers of Congress and was signed in July 2025.

Although some prominent Democratic lawmakers opposed the legislation, the bipartisan vote shows that at least part of the Democratic Party supports bringing stablecoin activity inside the regulated financial system when consumer protections and accountability are in place.

The law gives the OCC responsibility for reviewing applications from certain uninsured national banks and other eligible stablecoin issuers. It also limits how long the agency can leave a substantially complete application unresolved.

If the OCC does not act within 120 days, an application may be deemed approved under the law. A denial must explain the agency’s reasoning and identify what the applicant would need to do to qualify.

A future OCC could still reject an application or impose demanding conditions, but it could not indefinitely delay a decision. This provides stablecoin applicants with a statutory timeline that a new administration could not easily remove on its own.

The GENIUS Act also establishes a federal licensing framework for qualified payment stablecoin issuers, including certain nonbank companies. The law may also permit some national trust banks to issue stablecoins, although banking industry groups continue to debate the scope of that authority.

What the Election Outlook Means for Applicants

Companies seeking a bank charter should continue preparing rather than waiting for the next election cycle. The current environment is more favorable to new bank formation than at any point in more than a decade, and the next two years may represent the strongest opportunity for well-prepared applicants.

Regardless of who wins in 2028, successful applicants will need strong capitalization, experienced executives, detailed business plans and credible compliance systems. They will also need to demonstrate how their proposed bank will serve consumers, businesses and communities rather than simply advance the interests of its sponsors.

Bottom Line

Neither the midterm elections nor a likely change in presidential leadership in 2028 is expected to close the door on new bank charters. Elections can influence the level of scrutiny, the speed of reviews and the conditions attached to approvals, but a complete halt is unlikely.

The GENIUS Act provides additional certainty for qualifying stablecoin applicants, while the current OCC, FDIC and Federal Reserve leadership continues to support a more active approach to new bank formation. The likely future is a slower and more selective approval process, not the end of de novo banking.

The article was written by Juan Pablo Perez-Sangimino, senior director at Klaros Group. Before joining the firm, he worked on innovation policy at the Federal Reserve Board and served as an attorney at the OCC, focusing on banking regulation, financial stability, digital assets and stablecoins.

Source: TheFinancialBrand.com