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FDIC bolsters support for de novos


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Investment Banking Essentials Newsletter April Edition - 2022


Banking Essentials Newsletter April Edition - 2022

FDIC bolsters support for de novos

TheFDIC wants to tackle the lackluster resurgence of now that the country is"clearly past the crisis," Chairman Martin Gruenberg said April 6.

Theagency is scalingback its heightened supervisory monitoring period for de novos fromseven years to its pre-crisis period of three years, he said in a speech.

TheFDIC is also planning outreach meetings, has designated experts and committeesas points of contact for new applications at regional offices and is developinga handbook to aid applicants, he said.

"With the consolidation that's taken place, there'splenty of room for new community banks," Gruenberg said at a press meetingfollowing his speech at the FDIC's April 6 community banking conference.

Gruenbergsaid at the press meeting that he wants to make the process as"user-friendly" as possible. The FDIC works closely with the OCC andstate commissioners on the review process for new charters and can make theprocess easy to navigate "so that we can get to a successfuloutcome," he said.

"If you want to get the attention of FDIC staff, calland say, 'I'm interested in starting a new community bank,'" Gruenbergsaid. "You will get a lot of people very eager to work with you."

TheFDIC's plan to encourage more de novo charters comes after years withoutmany newinstitutions. The frequency of failures of de novos in the 2000s made bothregulators and investors wary.

Sincethe end of 2010, no de novo banks formed until Bird in Hand, Pa.-basedBank of Bird-in-Handopened near the end of 2013, with a strong connection to the Amish community. Afew more entities have applied to form banks since then, the most recent beingCosta Mesa, Calif.-based BlueGate Bank earlier this year.

TheFDIC had extended theperiod from three years to seven years in 2009. In a letter regarding thatchange, the FDIC said de novos "pose an elevated risk to the DepositInsurance Fund, particularly during an economic downturn." It noted thatbanks in their first seven years made up a relatively high proportion of banksthat had failed in 2008 and as of that time in 2009.

Gruenbergsaid he feels "very comfortable" going back to the three-year periodnow that the country is past the crisis.  

"The seven-year period wasestablished during the financial crisis in response to the disproportionatenumber of de novo institutions that were experiencing difficulties orfailing," he said in opening remarks at the April 6 conference. "Inthe current environment, and in light of strengthened, forward-lookingsupervision, it is appropriate to go back to the three-year period."