FDIC proposes contingent approval for de novo banks

The FDIC is introducing contingent approval for de novo applications. The agency plans to provide de novo applicants that satisfy requirements contingent approval within 120 days of receiving the application and approval within 12 months after receiving additional information and complete organizational steps, according to an Aug. 10 announcement. .The FDIC also expects de novo applicants to concurrently file with the agency and the OCC or their state banking department. “The FDIC will coordinate with the chartering authority throughout the application process to promote efficiency, avoid duplication and ensure timely action,” according to the report. FDIC Chair Travis Hill said contingent approval is intended to encourage new bank formation and improve the efficiency of the application process while preventing applicants from spending a significant time raising capital, staffing and infrastructure development. “Improving the de novo process and encouraging more new bank formation has been a key priority for the FDIC,” he said. “Today’s action is one of several steps the FDIC has been working on in furtherance of this goal. A healthy pipeline of new entrants is critical to the long-term vitality of the banking sector, particularly for community banks.”The American Bankers Association supported the decision, saying de novo banks “promote competition and greater economic activity in communities across the country.” De novo bank formations remain historically low, averaging less than 10 per year. Application pipelines have increased, with more than 20 groups recently filing deposit insurance applications with the FDIC. The OCC has handled an influx of new national charter and digital-asset trust applications with fintechs, digital-asset companies and traditional community banks, moving levels closer to before the Great Recession.