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FDIC disputes Acting Comptroller's allegations of choking de novo process

After Acting Comptroller of the Currency Keith Noreika blamed the Federal Deposit Insurance Corp. for low numbers of de novo creations, the FDIC says it is assessing different criteria than the OCC, and has in fact approved a number of applications.

On a July 28 podcast, Noreika said the FDIC has only granted "four or five" deposit insurance applications, alleging that the regulator failed to act on any of the 14 institutions approved by the Office of the Comptroller of the Currency and the Office of Thrift Supervision between 2008 and 2011.

"To me, that's unconscionable for a regulatory agency not to give you a 'yes' or a 'no' that you can challenge under the Administrative Procedure Act in court, but instead just to let you hang and use all your money," Noreika said.

The FDIC counters that the OCC's chartering process is completely different from the FDIC's role in reviewing applications for deposit insurance, a responsibility assigned in a 1991 law in the aftermath of the banking and thrift crisis.

"A key lesson learned from that experience was that the incentives of chartering agencies often were not the same as those of the FDIC in the protection of the deposit insurance fund," FDIC spokesperson Barbara Hagenbaugh said in a statement emailed to S&P Global Market Intelligence on Aug. 7.

The FDIC says it has approved nine applications since 2011, with another five applications pending. In an email, OCC spokesperson Bryan Hubbard said the FDIC's numbers are not in dispute, but pointed to the 14 institutions between 2008 and 2011 that withdrew their applications after the FDIC failed to act on related deposit insurance approval.

In Noreika's testimony to Congress on June 22, the acting comptroller advocated for streamlining the application process so companies will get FDIC deposit insurance upon OCC certification. Noreika recommended a 30-day period for the FDIC to object to any deposit insurance to an approved new bank.