FDIC Pushes for De Novo Banks

Manatt, Phelps & Phillips, LLP

Manatt, Phelps & Phillips, LLP

Undertaking a serious push to encourage de novo banks, the Federal Deposit Insurance Corporation (FDIC) announced multiple initiatives and released new resources in the hopes of attracting new banks.

The efforts include a request for comment on the de novo application process, the creation of a voluntary process to get feedback on a new bank proposal before filing a formal application and an update to publications related to the deposit insurance application process.

What happened

With updated resources and new initiatives, the FDIC has launched a multifaceted movement to encourage de novo banks.

“A pipeline of new banks is critical to the long-term health of the industry and communities across the country,” FDIC Chair Jelena McWilliams said in a statement. “The application process should not be overly burdensome and should not deter prospective banks from applying. The FDIC wants to see more de novo banks, and we are hard at work on making this a reality.”

In a new request for information (RFI), the FDIC turned to the industry for feedback on all aspects of the deposit insurance application process. Specifically, the agency asked what steps, if any, it can take to improve the de novo application process and whether there are any specific components of the application process that “particularly discourage” potential applicants from initiating or completing the process.

Could the FDIC update or supplement existing resources to clarify its expectations and promote a more transparent application process? In addition to this question, the agency queried whether aspects of the prefiling process should be improved to help applicants.

The RFI also presented topics such as the application form and its related instructions, the field investigation process, and whether tweaks are needed in the process for proposed traditional community banks as well as proposed institutions that are not traditional community banks.

Input on ways the FDIC could or should support the continuing evolution of emerging technology and fintechs (along with potential risks and how to mitigate them) as part of the application process also made the list of requests, as did clarity on the agency’s expectations regarding capital adequacy and liquidity funding for prospective applicants.

As a catchall inquiry, the RFI wondered whether any “legal, regulatory, economic, technological, or other factors” separate from the application process discourage potential applicants from submitting applications for deposit insurance, and whether stakeholders could offer any other suggestions for improving “the effectiveness, efficiency, or transparency of the application process.”

In addition to the RFI, the FDIC announced new initiatives related to de novo banks.

The agency established a voluntary process that provides organizers of new institutions the option of requesting feedback on a draft deposit insurance proposal before filing a formal application. The new process offers both the agency and the organizers an early opportunity to identify potential challenges with respect to statutory criteria, areas that may require further detail or support, and potential issues or concerns, the FDIC explained.

The FDIC also amended its time frame guidelines for applications and created a new, designated mailbox for bankers, applicants and other interested parties to pose questions about a specific application or the application process in general.

Finally, the agency updated two publications: Applying for Deposit Insurance—A Handbook for Organizers of De Novo Institutions and Deposit Insurance Applications Procedures Manual. The publications offer guidance for both organizers and FDIC staff.

To access all of the FDIC’s materials on de novo banks, click here.

Why it matters

Whether the FDIC’s message of open arms actually results in more de novo banks remains an open question. The agency has tried before to put out the welcome mat for de novos, and other bank regulatory agencies have similarly indicated they are open for business for de novos. Whether these new communications will actually lead to new charters, and whether groups will come together to actually form de novo banks, will be something to watch for in 2019.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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