Chasing Charters

BY MICHELE ALT

When it comes to bank charters, there’s a sizable gulf between the OCC’s words and actions. 

In his February 21 speech at Vanderbilt University OCC Acting Controller Mike Hsu said:

“As Acting Comptroller, my approach to national bank charters has been clear: We don’t chase. If a fintech wants a national bank charter, we welcome that and will review the application on its merits. Several fintechs have filed charter applications and received OCC approval. We will not, however, lower our standards, create a special regime, or take an overly expansive view of banking to entice new entrants or in the hope of bringing a particular activity into the bank regulatory perimeter.”

The OCC’s own data, however, shows that not only does the OCC “not chase,” it actively chases applicants away.

The three fintech applications Hsu cited (Varo, Lending Club, SoFi) don’t even come close to “blurring the lines” or anything “novel” and only one (SoFi) was approved during his term.

And the OCC’s own data for Fiscal Year 2023 (my highlights) shows that new bank formation, M&A, and fintech are not agency priorities:

• Total OCC Applications: 723

• New national bank applications: 9

• Applications to change bank ownership or assets: 26 

• New national bank approvals: 6

A deeper dive reveals this additional data point:

• Fintech company application approvals: 0

(Don’t be fooled by the zeros in the “Denied” column - the OCC will encourage an applicant to withdraw instead of denying the application.)

On January 30, 2024, bunq - the second largest neobank in the EU - withdrew its application after 301 days in the OCC’s queue. If you’re counting, it’s now been 1,166 days since the OCC’s last fintech de novo approval. (The OCC’s February 1st quiet approval of Paycom’s application to charter a national trust bank doesn’t really count as fintech approval and was not cited by the Acting Comptroller as one). The problem with this is that the providers from which a growing number of Americans get their financial services are kept out of the regulatory perimeter - which means the regulatory agencies have less, not more, visibility into the risks they may pose. 

But if you’re interested in chartering a new bank or acquiring or merging with an existing bank, don’t give up. The OCC’s blockade is unsustainable:

• Lack of new bank formation reduces competition, customer choice, and availability of credit. 

• Acting Comptroller Hsu recently observed we need more national bank consolidation in light of commercial real estate troubles.

• Refusing fintechs entry into the regulatory perimeter limits the agencies’ sight lines to a sector on which tens of millions of Americans rely for their financial services and products.

It takes months to prepare a complete application. Consider starting now and you’ll be ready when the roadblocks inevitably start to come down.

Application type	Applications received	Approved	Conditionally Approved	Denied	Total
Branches	477	460	0	0	460
Capital/sub-debt	34	26	4	0	30
Change in bank control	4	3	0	0	3
Charters	9	3	3	0	6
Charter conversions	6	2	3	0	5
Federal branches	0	1	0	0	1
Fiduciary powers	0	0	0	0	0
Licensing other	8	4	0	0	4
Mergers	18	20	3	0	23
Relocations	140	139	0	0	139
Reorganizations	15	12	4	0	16
Subsidiaries	6	9	0	0	9
Substantial change in assets	4	1	0	0	1
Mutual to stock conversions	2	0	3	0	3
Total	723	680	20	0	700

Image by Adobe Stock.