FDIC Throttles Back New Bank Requirements

The Federal Deposit Insurance Corp. is planning to reduce what American Banker termed “heightened regulatory scrutiny” that would envelop newly chartered banks from seven years to three years as institutionalized in the period following the financial crisis.

In a speech during a banking conference organized by his enterprise, FDIC Director Martin Gruenberg said: “We have seen the number of de novo applications decline to a trickle in receipt years. In the current environment, and in light of strengthened, forward-looking supervision, it is appropriate to go back to the three-year period.”

“There is ample room for new community banks with sound funding and well-conceived business plans to serve their local markets. It is essential that they have a clear path to approval.”

Among other efforts, according to American Banker, the FDIC is “planning outreach meetings with the banking industry to ensure that they are well-informed about the FDIC’s application approval processes and the tools and resources available to assist them.” There will also be a handbook that will outline the parameters of the review process.

All of the above is meant to help address the lack of new banks coming into existence post-financial crisis, with only a few chartered in the past five years. Critics have said the organization itself has held requirements too stringent to charter new banks. The FDIC has countered that the economy has been a tough hurdle to jump.

Gruenberg, American Banker reported, advised: “If a group’s interested in starting a new bank, the first place they should start is us.” Interested parties should “understand the requirements, understand the expectations, establish — if I may suggest — a working relationship with our staff and then assess what resources they need to invest in order to make this happen.”