De novo national banks face a new road map to OCC approval

The OCC’s New Approach to Conditional Approval of National Bank Charters

The Office of the Comptroller of the Currency’s (OCC) recent conditional approval of a national bank charter for Columbus, Ohio-based Erebor Bank is a significant development. This step aligns with the goals of Comptroller Jonathan Gould to foster a diverse and dynamic federal banking system. It is predicted that Erebor will be the first of many applicants to receive such approval from the OCC. (source)

Conditional approval of a national bank charter used to be a virtual guarantee that an institution would open its doors. But the OCC’s recent treatment of Erebor Bank suggests that banks with conditional approvals still have work to do, write Chloé Dolsenhe and Jenny Small.

Bloomberg

Understanding the OCC’s Revised Approval Process

The next phase after a bank receives conditional approval from the OCC is known as the “in-org” phase, during which the OCC conducts a field examination before granting full charter approval. In the case of Erebor, this process requires the bank to submit its operational framework for the OCC’s review, indicating a shift in the OCC’s approach to charter approval.

Historically, the OCC has assessed operational readiness during the application review phase. By the time a bank received conditional approval, the OCC already had a comprehensive understanding of the business plan, operations, and associated risks. The in-org phase was often seen as a transition period for the bank, focusing on raising additional capital and drafting relevant policies and procedures.

A New Focus on Operational Readiness

However, with the recent approval of Erebor’s charter, the OCC appears to be shifting the robust evaluation of business plans and operations to the in-org phase. This move facilitates a more effective allocation of the OCC’s expert staff and resources amidst the influx of applications. It also aligns with the OCC’s move towards risk-based supervision.

The in-org phase provides a unique opportunity for new bank organizers to interact directly with OCC supervisory staff. With the heightened expectation for active engagement by the bank’s organizers, it is crucial to focus on capital, risk management, and their relationship with the OCC.

Challenges and Opportunities in the In-Org Phase

During the in-org phase, the initial measure of capital from the application review may no longer be considered reliable, particularly for digital asset charters. Organizers must, therefore, be prepared for an ongoing dialogue on capital requirements. They should also present robust risk assessments and management plans that support the proposed capital and operations.

The ultimate success of bank organizers in the in-org phase depends on their ability to build rapport with the OCC, demonstrate alignment with regulatory expectations, and exhibit resiliency in the face of setbacks. A transparent and receptive relationship with the OCC is vital for success and a smoother transition into a regulated environment.

Conclusion

The revised approach of the OCC provides a valuable opportunity for bank organizers to build trust with the OCC, educate examiners on novel products, and receive feedback from experienced examiners. To succeed, organizers must demonstrate their ability to meet the OCC’s expectations and secure the coveted final approval to operate as a bank.

Source: Here

John Wick

ABJ, a Senior Writer at Luxurylaunches, brings over 10 years of automotive journalism expertise. He provides insightful coverage of the latest cars and motorcycles across American and European markets, while also highlighting luxury yachts, high-end watches, and gadgets. An authentic automobile aficionado, his commitment shines through in educating readers about the automotive world. When the keyboard rests, Sayan feeds his wanderlust, traversing the world on his motorcycle.