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.
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.
- 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.