By PYMNTS | January 27, 2025
A faster, simpler path to obtaining bank charters would foster innovative financial services, keep this activity within the regulatory perimeter and enhance competition, Klaros Group Partner Michele Alt and seven banking and financial services lawyers said in an open letter published Monday (Jan. 27).
The letter is addressed to the incoming administration and suggests steps three banking agencies — the Federal Deposit Insurance Corp., Office of the Comptroller of the Currency and Federal Reserve — can take to encourage “new and innovative” bank formation, Alt said in a Monday blog post.
The signers published the open letter at a time when the agencies’ “complex and burdensome” bank charter application process has contributed to bank formation being at an all-time low, Alt said in the post.
“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,” Alt said. “It’s also bad because freezing out new banks — both traditional and FinTech — has discouraged innovation and competition in banking.”
Shifts at the federal level have boosted optimism for meaningful change, Alt said.
The open letter encourages the agencies to place as much emphasis on new bank formation as they do on bank supervision, update their interagency business plan guidelines, provide objective standards for the success of a new bank, and align their agency review processes.
It also suggests that they adhere to firm deadlines when making decisions on applications, minimize the disruption caused by “frivolous protests,” require agencies to issue written and specific notice of intent to deny, and clarify pre-opening exam expectations.
“We encourage the agencies to take these steps quickly — none require Congressional action,” the signers said in their summary of the open letter.
The acting chairman of the FDIC named by President Donald Trump, Travis Hill, said Tuesday (Jan. 21) that he wants to conduct a sweeping review of bank regulations.
Hill placed that review at the top of a lengthy list of matters he hopes to address, saying in a statement that he plans for a “wholesale review of regulations, guidance, and manuals to ensure our rules and approach promote a vibrant, growing economy.”
