US HOUSE COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM & FDIC APPLICATION PROCESS:
Only three state-chartered banks have been approved for FDIC insurance in the last eight years. On Wednesday, July 13 Matt Browning, a former officer with the National Association of Industrial Bankers and the Utah Banker’s Association, testifies to how the FDIC’s policies have had a chilling effect upon the bank application process.
While the FDIC states that it is open to accepting applications, it has established unreasonable standards and grueling pre-application process that prevents anyone from applying for a bank charter.
PURPOSE OF HEARING:
- To examine the decline of new (de novo) banks and industrial loan companies (ILCs) in recent years.
- To review the Federal Deposit Insurance Corporation’s (FDIC) role in issuing new bank charters, and its regulation and supervision of financial institutions.
BACKGROUND OF ISSUE:
- In 1933, Congress established the FDIC to insure bank deposits and provide a federal government guarantee of safety for depositors’ money in the event of a bank failure.
- In order to receive FDIC insurance, de novo banks must apply and be approved by the Board of Directors, in addition to meeting statutory requirements.
- In August 2009, the FDIC issued a financial institution letter (FIL) which changed requirements for de novo banks.
o Between 2004 and 2008, the FDIC received on average 219 applications per year.
o Since the policy change, the number of applications has drastically fallen to an average of three applications per year from 2011 – 2015.
- ILCs are specialized, state-chartered, FDIC-insured banking institutions primarily used to offer financial services that directly support products sold by the parent company.