On December 6, the FDIC announced actions to promote a “more transparent, streamlined, and accountable deposit insurance application process” to encourage the establishment of new, or de novo, banks.
“A pipeline of new banks is critical to the long-term health of the industry and communities across the country. 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 to make this a reality,” said FDIC Chairman, Jelena McWilliams.
The number of banking institutions has been declining steadily for over 2 decades. In 2017, there were a total of 4,918 commercial banks. In 2007, there were 7,279 commercial banks and 9,143 in 1997. Going back to 1990, the number of commercial banks was 12,343. Bank mergers have accelerated, and there have been only a very small number of new commercial banking institutions formed in the past decade. Contributing factors have been regulatory pressures, coupled with poor economic conditions which have thinned margins and inflated costs along with barriers to entry via the regulatory system.
The FDIC is seeking comment from interested parties on all aspects of the deposit insurance application process. In addition to any general comments, the FDIC invites comments to the questions copied below.
- What steps, if any, can the FDIC take to improve the de novo application process?
- Are there any specific aspects or components of the application process that particularly discourage potential applicants from initiating or completing the application process?
- Are there ways the FDIC could or should update or supplement existing resources to clarify expectations and promote a more transparent application process? If so, please provide details and support.
- Are there any aspects of the pre-filing process, with respect to the newly announced process regarding draft deposit insurance proposals, that could be modified or enhanced to further clarify expectations or processes for prospective applicants and improve applicants’ ability to submit a substantially complete application?
- How effective is the application form and its related instructions? Could any elements of the form or instructions be modified or enhanced to improve applicants’ ability to submit a substantially complete application?
- Are there any aspects of the field investigation process that could be improved to better facilitate completion of the application process?
- In what ways could or should the FDIC modify the application process for proposed traditional community banks? How would any suggested changes impact the evaluation of the statutory factors?
- In what ways could or should the FDIC modify the application process for proposed institutions that are not traditional community banks? How would any suggested changes impact the evaluation of the statutory factors?
- Are there ways the FDIC could or should tailor its evaluation of applications from proposed institutions that are not traditional community banks, consistent with the statutory factors as described in the FDIC Statement of Policy on Applications for Deposit Insurance (SOP)? If so, please explain.
- Are there ways the FDIC could or should support the continuing evolution of emerging technology and fintech companies as part of its application review process? Are there particular risks associated with any such proposals, and, if so, are there ways such risks could or should be mitigated?
- Are the FDIC’s expectations (as provided by the FDIC resources identified in this RFI) regarding capital adequacy and liquidity/funding for prospective applicants sufficiently clear and understandable? If not, what additional information or clarifications could the FDIC provide?
- Are there legal, regulatory, economic, technological, or other factors separate from the application process that discourage potential applicants from submitting applications for deposit insurance that the FDIC should be aware of? If so, are there steps the FDIC could or should take to mitigate the impact of such factors?
- Are there any other suggestions that the FDIC should consider for improving the effectiveness, efficiency, or transparency of the application process, or for addressing any other interests or concerns of stakeholders relative to the application process?
The FDIC has provided a number of resources, accessible through the FDIC’s website, to aid organizers and other interested parties in understanding the application process.