Op-Ed: FDIC Faces Uphill Battle in Becoming Friendly to De Novos

Despite recent efforts to clear a path for de novo bank formation, the FDIC still has a long way to go in shifting the agency’s overall attitude toward new banks, ABA EVP Wayne Abernathy wrote in an American Banker op-ed today. Since 2010, only three new banks have been chartered in the U.S.

De novo formation has become a recent focal point for the FDIC; earlier this year, the agency announced that it would reduce the de novo period from seven years to three years and provided updated guidance on regulatory expectations for new banks. Chairman Martin Gruenberg added that the FDIC plans to hold future outreach meetings to provide more information on the de novo process, and will publish a “practical guide” for chartering a new bank by the end of 2016.

While Abernathy praised the agency’s efforts to date, he noted that a deeper shift must take place within the FDIC to root these policy changes into the agency’s culture. In particular, Abernathy said that the deposit insurer’s attitudes toward bank failures must change. During the financial crisis, there was an “unwritten policy of the FDIC… to approve no new banks,” he pointed out, adding that regulators “discouraged applications and slow-walked those that were made.”

“Regulators need to recognize that they can christen new banking ships without insisting that they all be unsinkable,” he wrote. “Our financial commerce needs new banking entrants, a point that Chairman Gruenberg has frequently made himself.”

Abernathy’s op-ed echoed comments by banker Guy Williams testifying for ABA this summer during a congressional hearing on de novo formation, when the association called on Congress to address the regulatory impediments to bank startups by reducing regulatory burdens, lowering capital requirements and allowing for greater flexibility in business plans.


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