In a letter to Acting Comptroller of the Currency Keith Noreika today, the American Bankers Association highlighted key questions that regulators and policymakers should consider concerning the deposit insurance application process for de novo banks. With the number of new bank charters persistently low, particularly in the years since the financial crisis, Noreika recently asked policymakers consider changes to the law granting FDIC the ability to deny deposit insurance to newly chartered banks.
Prior to 1991, newly chartered banks were automatically granted deposit insurance. That year, as part of the response to the savings and loan crisis, Congress passed a law giving the FDIC discretion over whether to grant deposit insurance, which led to banks effectively having to submit two applications for deposit insurance: one to the OCC or state chartering authority and one to the FDIC.
While the conversation surrounding the FDIC’s discretion thus far has been in the context of national bank charters, ABA asked whether the OCC envisions a similar treatment for state chartered banks. The association also asked whether the OCC envisions changes to the law that would remove the FDIC’s discretion entirely, or if it would support a process by which deposit insurance would be considered automatically granted unless the FDIC raised specific objections.
ABA’s Government Relations Council and Community Bankers Council have been engaged on this issue, and ABA will continue to solicit feedback from member banks as discussions continue in the days ahead. For more information, contact ABA’s Wayne Abernathy.