Today a group of prominent banking and financial services lawyers and I released an open letter to the incoming administration outlining eight steps the FDIC, OCC, and Federal Reserve (“Agencies”) can and should take to encourage new and innovative bank formation.
Why? Because new bank formation in the United States is at an all-time low and potential organizers are deterred by the Agencies’ complex and burdensome bank charter application process. That’s bad because it’s kept many fintech companies - companies on which Americans have increasingly come to rely for their financial services - outside the banking agencies’ direct supervisory purview. It’s also bad because freezing out new banks - both traditional and fintech - has discouraged innovation and competition in banking. Creating a faster, simpler path by which applicants could obtain bank charters will foster innovative financial services through the approval and supervision of new banks, keep this activity within the regulatory perimeter, and enhance competition. It’s just common sense.
With a number of shifts underway at the federal level, including Travis Hill, who’s noted his support for new bank formation, stepping up at the FDIC, we’re optimistic about the prospects for meaningful change. By providing greater objectivity and transparency in the application process, the changes we’ve outlined will ensure fair treatment of applicants, and enhance government efficiency. None of the changes we propose require congressional action; all could be enacted quickly.
The executive summary is below. If you’re a true regulatory nerd you can read the full letter, farther below. If you prefer to keep it short, you might prefer my two word summary - “Winning banking.” I’d love to know what you think and if you, like me, see opportunity on the horizon, I’m happy to chat. We know this topic is of interest to many, and we welcome additional support. If you are interested in adding your name and organization as a signatory, let me know: michele@klarosgroup.com.
Photo by Floriane Vita on Unsplash