Amid growing interest among investors and bankers in de novo bank charters, American Bankers Association Chairman Ken Burgess convened a banker task force to identify current obstacles to de novo formation and recommend solutions. Burgess — who chairs FirstCapital Bank of Texas in Midland, which he founded as a de novo in 1998 — and ABA President and CEO Rob Nichols presented the group’s findings to FDIC Chairman Jelena McWilliams in a recent meeting.
Composed primarily of bank leaders with recent de novo experience, the task force identified several regulatory challenges to de novo applications, including a slow and lengthy approval process; perceptions that capital requirements are too high or could change; unrealistic regulatory expectations for deposit funding, along with inhibited deposit-gathering due to the FDIC rate cap; difficulties in getting to scale fast enough to meet regulatory compliance demands; and difficulty in attracting key staff early, in part because of uncertainty from these other challenges.
The task force recommended that the FDIC provide a clear timeline for consideration of applications, reconsider the rate cap as it applies to de novos, clarify that capital requirements will remain in line with those defined in the FDIC’s de novo manual and provide a dedicated de novo team at the agency to handle applications. “We have to make sure that we don’t lose one of the biggest assets we have — a vibrant community bank industry,” Burgess said in an American Banker story. “Community banks help fuel entrepreneurship.” For more information, contact ABA’s Wayne Abernathy.
