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How to Start a New Bank

June 1, 2017 Leave a Comment Written by Directors

Whether evaluating how to start a new bank, how to start a community bank, how to start a private bank or how to start an online bank all de novo banks must address specific regulatory requirements to start a bank.  These requirements are addressed in seven regulatory factors.

De Novo Bank Regulatory Factors

  • Financial history and condition of the organizing group;
  • The adequacy of its capital structure;
  • Its future earnings prospects;
  • The general character and fitness of its management;
  • The risk presented by the institution to the Deposit Insurance Fund;
  • The convenience and needs of the community to be served by the institution; and
  • Whether the institution’s corporate powers are consistent with the purposes of the FDIC Act.

Organizing Group

The Organizing group can be all or any of the following.

  • Individual who will serves as a bank director;
  • An incorporator, a person or entity that signs the institution’s articles of incorporation; or
  • An investor (also known as a “Founder”) who contributes or commits funds toward an institutions organizational expenses, but is not a director of the bank.

Phases to Start a New Bank

Successfully starting a bank, referred to as a de novo bank, is a process segregated into nine phases.

  • Foundational
  • Director Education
  • Feasibility Studies
  • Strategic Planning
  • Presidential Search
  • Application for Deposit Insurance and Banking Charter
  • Capital Raising
  • Pre-Opening and Opening

Application for Deposit Insurance

  • This represents the Interagency Charter and Deposit Insurance Application submitted to the Federal Deposit Insurance Corporation and the appropriate bank chartering agency.

Bank Charter Definitions

  • A nationally chartered bank, granted by the Office of the Comptroller of the Currency; or
  • A state chartered bank, granted by individual states

How much does it cost to start a bank?

  • It depends on the type of bank, and its strategic plan, risk profile, management team, and organizing group.

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Questions & Answers

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