Banking Law

FiCri Advisor followed up a post of last week about the FDIC's new policy for de novo banks (which prompted my thoughts on the matter here) with another post over the weekend. They asked the remaining federal commercial bank regulators if they intended to increase the period during which they subjected de novo institutions to increased regulatory oversight and additional restrictions on capital and operations to seven years. They all said "Nyet."

OCC, OTS and Federal Reserve officials have confirmed to FinCri Advisor that their rules on the issue will not change.

"We feel very good about the policies that are in place," says the OCC's Kevin Mukri.

"We're not considering a change in the policy," says the Fed's Barbara Hagenbaugh.

"We think the current time frame is adequate," says the OTS' William Ruberry.  "We don't see any reason for change."

It's apparent that the FDIC has filled its regulatory brethren with inertia. Well, inertia for clamping down on new bank charters. In fact, OCC spokesman Kevin Mukri indicated that when it comes to new national bank charters, the OCC's all charged up and ready to go.

Unlike the FDIC, the OCC has a set timetable for approving new bank applications: 120 days. "We're very clear about what we are going to be looking for. We always encourage de novos to come meet with us," Mukri says. "We feel it's a great time for banking. We continue to approve applications, and we continue to get applications."

But here's the catch: Lawrence Kaplan correctly observes that whether the OCC, the Federal Reserve, or the OTS are receptive to de novo charter applications, as long as the FDIC is down on them, the organizers could still be left sitting on their thumbs.

"The FDIC really has the last laugh here," notes attorney Lawrence Kaplan of Paul Hastings in Washington, D.C. "The question is: Do they get insurance? It's a separate approval. As a result, they can put in whatever conditions they want."

As I said last week, that's what I eventually think will happen. Although the revised policy on de novo charters applies, by its terms, only to state-chartered, non-FRB-member banks, I think it's highly likely that the FDIC will apply the same policy to all applications for insurance of accounts for de novo banks and thrifts, regardless of the charter sought. Otherwise, as long-time Dallas banking attorney "Stormy" Grieve asserts, we'd be in for a wave of "charter shopping" by organizers trying to do an end run around the FDIC. That makes no sense, if the FDIC seriously believes its rationale for the dangers posed by de novo institutions.