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Supervision & Regulation


Requirements for De Novo Banks


After the pre-filing meeting, an application may be submitted for the Reserve Bank's review. The final application must include the following items before it will be considered complete and acceptable for processing.

  • Preliminary state charter approval must be granted prior to acceptance.
  • The president or chief executive officer must be identified. This individual must demonstrate the ability to effectively manage a de novo organization. Prior to opening, the bank must identify one or more additional officers to augment the experience of the president or CEO. The proposed management team should have expertise in the areas of bank administration, commercial and consumer lending, bank operations, and investment/funds management.
  • A minimum of 25 percent of the bank's stock should be subscribed.
  • The organizers should have a firm operating or business plan and proposed sufficient capital. A detailed business plan for the bank's first three years of operations must be submitted with the final application. The business plan should demonstrate that the bank's tangible leverage ratio will not be less than 9 percent at the end of three years of operations. The plan must be realistic in relationship to market demand, customer base, competition, and general economic conditions.
  • At least two of the outside directors should have previous financial institution experience that is satisfactory to the Reserve Bank. The majority of the directors should have close ties to the bank's community.
  • If the bank's premises will be leased, copies of the lease agreement must be submitted. An independent appraisal of the lease or property value of the bank's premises must be submitted if an insider real estate transaction will exist.
  • The bank's loan, investment, and asset/liability management policies must be submitted.

Business Plan for De Novo Banks

At a minimum, the bank's business plan should include the following items.

  • Describe the economic environment that the bank will operate in during its first three years. Indicate any regional or local economic factors that affect or are expected to affect the operations of the bank.
  • Describe the bank's strategies to capture market share in deposits and loans.
  • Analyze the competition. Give an analysis of their market strategies.
  • Describe in detail each type of loan that is planned, the extent to which each will be made, and whether the institution will generate loans directly or by utilizing outside sources; i.e. loan brokers. Fully describe policies and practices by which the institution will independently investigate and document extensions of credit, particularly those outside of the normal lending territory. Provide a breakdown of the aggregate dollar amount, maturities, and estimated yield by the different types of loans to be made.
  • Summarize the bank's other planned investments, including composition, expected return, maturity and purpose.
  • Describe any current and/or projected sources of savings and deposits and the methods used in their solicitation.
  • Describe in detail the policies and techniques to be employed to measure, manage, control, report and account for interest rate risk.
  • Discuss the bank's strategies and plans to match the maturities of earning assets and interest bearing liabilities.
  • Discuss levels of liquidity, capital, products, etc., and the overall effect of implementation of the plan on growth, profitability, and net worth. Provide volume, time frames, etc.
  • Fully describe all provisions that reasonably assure the continuity of management and succession of competent management.
  • Describe the procedures to be employed by the board of directors to monitor adherence to and assure compliance with the business plan.
  • Describe how the board of directors anticipates adjusting and adopting the business plan to accommodate material economic changes.

(Revised 12/21/99)