State Banks

Combining ILC and GENIUS Act applications is an intriguing possibility for a fintech looking to break out of the sponsor-bank paradigm. In this scenario, the company applies for a new ILC charter whose business plan includes a subsidiary issuer. The federal approver and regulator for both applications would be the FDIC. The approach has pluses and minuses. On one hand, the ILC and its subsidiary would enjoy: ✅ Nationwide deposit-taking and lending powers with the ability to export home state interest rates; ✅ Full credit and debit card issuance and acquiring capabilities; ✅ Eligibility for...

The FDIC's ILC RFI is missing a very important section on funding. Deposit and funding strategy issues determine the outcome of many ILC applications. Here are some questions they could have asked: How should the FDIC assess an applicant business plan funded primarily by sources other than customer deposits? Should the FDIC's analysis differ to the extent the proposed funding consists of: (1) traditional brokered deposits, (2) securitization, (3) secured wholesale borrowings, (4) parent credit lines or asset purchases? In the case of securitization, how much weight should the FDIC give the...

There’s a question in the FDIC’s Industrial Bank RFI that will make or break an industrial bank application. Which one? That depends on the applicant, the business model, and the structure. But I can say this with certainty: the question is in there. That's because the RFI goes far beyond the high-level debate over whether industrial banks should exist or who should be allowed to own them. It drills into specific factors that drive FDIC’s decision-making on individual applications. In fact, almost every decisive issue I’ve seen in real-world industrial bank applications is reflected somewhere...

In my experience, the top success factor for a novel bank charter application is already having a customer deposit business. Why? Because the biggest hurdle most applicants face is convincing the FDIC that their deposit projections are achievable. That's something to keep in mind now that the window for ILC charters appears to be open again. Even when the "window is open," applications from lending-only companies often don’t make it far enough to be rejected on “policy” grounds. They get bogged down making the case for their business plan -- especially the deposit strategy. It's a little hard...

We assist financial institutions and fintechs with charter strategy, regulatory applications, and transactions, including bank-fintech partnerships and acquisitions. Our practice covers the full range of licensing options including commercial bank charters, ILC charters, trust bank charters, and money transmission licenses. We prepare regulatory applications, conduct due diligence on acquisition targets, advise on control issues under the Bank Holding Company Act, Bank Merger Act, and Change in Bank Control Act, and help structure bank-fintech partnerships to address regulatory expectations....

We provide comprehensive legal counsel to banks ranging from community institutions to the largest national and regional banks, as well as specialized trust, wealth management, and employee benefits institutions. Our services span regulatory compliance and examination support, licensing and charter applications, M&A transactions, and public policy advocacy before Congress and federal banking regulators. Capital Analysis: We assess treatment of assets, instruments, and transactions under bank or GSE capital rules. Consumer Compliance: We assist clients with compliance matters on a variety of...

BJ Sanford advises payments and fintech companies, U.S. and foreign banks, trade associations, investors, and policy and consulting firms. His practice centers on payments regulation, public policy, and the regulation of bank activities and structure. He also advises clients on regulatory capital, bank investments and control, affiliate transactions, the U.S. operations of foreign banks, and regulatory examinations. Payments regulation. BJ advises payments firms and banks on payment regulation, product development, and compliance with rules including Regulation E, Regulation Z, Regulation II...